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XVII 
WELFARE AS AN ECONOMIC QUANTITY 



WELFAEE AS AN ECONOMIC 
QUANTITY 



BY 



G. P. WATKINS 




BOSTON AND NEW YORK 

HOUGHTON MIFFLIN COMPANY 

®|>e Mxtt^tJt ^tz^^ Camlirib0e 

1915 



^^^ 



3 



COPYRIGHT, I9IS, BY HART, SCHAFFNER & MARX 
ALL RIGHTS RESERVED 

Published February iqis 



FEB 25 1915 

C) CI A ^ ^ 1 B 6 'o 



PREFACE 

This series of books owes its existence to the generosity of 
Messrs. Hart, Schaffner & Marx, of Chicago, who have 
shown a special interest in trying to draw the attention of 
American youth to the study of economic and commercial 
subjects. For this purpose they have delegated to the un- 
dersigned committee the task of selecting or approving of 
topics, making announcements, and awarding prizes annu- 
ally for those who wish to compete. 

For the year ending June 1, 1913, there were offered: — 

In Class A, which included any American without re- 
striction, a first prize of $1000, and a second prize of $500. 

In Class B, which included any who were at the time 
undergraduates of an American college, a first prize of 
$300, and a second prize of $200. 

Any essay submitted in Class B, if deemed of suflBcient 
merit, could receive a prize in Class A. 

The present volume, submitted in Class A, was awarded 
the second prize in that class. 

J. Laueence Laughlin, Chairman. 

University of Chicago. 
John B. Clark, 

Columbia University. 
Heney C. Adams, 

University of Michigan. 
Horace White, 

NeiD York City. 
Edwin F. Gay, 

Harvard University. 



AUTHOR'S PREFACE 

This essay is a study in the neglected field of economic 
consumption. It is a fragment of what was planned as a 
comprehensive treatise of this division of economics, and 
largely developed during my graduate work at Cornell 
University. But the part may be the better for standing 
by itself. It is frankly theoretical in general character. I 
quite agree that questions susceptible of detailed inductive 
or statistical investigation should receive such treatment 
instead of merely being given their place in a theory. That, 
however, must come later. 

Most of the essay assumes familiarity with the concepts 
and terms of recent economics and is technical in its inter- 
est. Certain chapters, however, — which are not among 
the earliest, — may perhaps be intelligible and interesting 
to the reader whose chief equipment is common knowledge 
and common sense. These are especially chapters viii (with 
VII as preliminary) and xvi; and also, though to a less de- 
gree, chapters v, xi, xiii, xiv, and xv. Whether a person 
of practical or reformative interest would be justified in 
going directly to the concluding chapter is to be doubted. 

No fundamental premises of economic thought are es- 
sentially affected by the ideas contained in this essay. It 
does propose certain qualifications and extensions of ac- 
cepted principles. What may be considered the general 
contribution it makes consists in the incorporation into 
systematic economic thought of some ideas that are, if 
not themselves new, such as can be found elsewhere — 
perhaps in common thought or in writings of no scientific 
standing — only as disconnected apergus. 

My scientific obligations, and the interrelations of the 
ideas developed to those of others, are indicated in text 



viii AUTHOR'S PREFACE 

and in footnotes, but I am not sure that all have been duly 
noted, since the matter was originally written some time 
ago and has undergone many changes. Though much that 
is characteristic of the Austrians — Menger, Wieser, and 
Bohm-Bawerk — is not accepted here, my point of depar- 
ture is obviously the same as theirs. The development from 
that point is in a different direction. The differences that 
emerge are partly, though not wholly, due, to this diver- 
gence of the subjects treated. The essay is, however, 
largely a criticism of the usual exposition of utility doc- 
trine. Suggestions received from recent American theory 
are also frequently negative, belonging, that is, in the 
category of association by contrast or opposition. 

The manuscript has been subjected to the criticism of 
Professor Alvin S. Johnson, who acted in place of Pro- 
fessor Clark as a judge of the papers submitted to the 
Hart, Schaffner & Marx Committee and has reviewed on 
its behalf the essay here pubHshed. He has made im- 
portant suggestions regarding terminology and also to- 
ward connecting up the ideas presented with those of 
other economic theorists, and he has made it necessary for 
me to elaborate and defend or to amend certain points. 
But I have no reason to suppose that he would accept as 
valid all the theories here set forth. With this exception 
the essay has not had the benefit of the friendly criticism 
of economists. But I am much indebted to two of my 
associates in the Bureau of Statistics and Accounts of 
the Public Service Commission, namely, to Mr. James L. 
Bahret, for numerous valuable editorial suggestions, and 
to Mr. L. H. Lubarsky, not only for drafting the diagrams, 
but for important mathematical assistance, including 
certain notes bearing his initials. Acknowledgment is also 
due to Professor John B. Clark for encouraging me to com- 
plete and publish this little book, which was first presented 
on somewhat the present plan as a paper in his seminar. 

G. P. Watkins. 

New York City, 
May 31, 1914. j 



CONTENTS 



INTRODUCTION. Welfare and Utility xix 

The title of this essay implies a dependence of welfare upon 
economic conditions — The "variation of utility" a technical 
description of the subject — What constitutes welfare — Rela- 
tion of utility to welfare — Neither word is definitely objective 
or definitely subjective in meaning — The sense in which wel- 
fare is an economic quantity — That "weKare" connotes 
sociality more than does "utility" is not an essential difference 

— The quantitative variation of utility is the connecting link 
between goods and welfare — There are several species of utility 
and their variation is complex — The economic aspect of welfare 
is essential, though not exhaustive — Moral judgment requires 
economic as well as other knowledge — Scope of following chap- 
ters — Underlying assumption that men are in general reason- 
able. 

CHAPTER I. Utility defined 1 

Utility the basic idea of a theory of consumption — The 
term defined — The abstract term for a relation — The con- 
cept is quantitative — The term has a collective significance — 
Specialization of goods obscures auxiliary uses — The discovery 
of new uses and the refinement of old. 

The quantitative conception of utility requires a measure — 
The conceptual measure of utility is contribution to satisfaction 

— The power to satisfy must be susceptible of generalization — 
Expectations must be reasonable — Utility is not proportioned 
to merely marginal satisfaction; instance the good that is, for 
the consumption of a small private economy, unique — Equat- 
ing the satisfactions of different individuals — The absence of 
definite allocation of super-marginal utility explains but does 
not justify its neglect. 

CHAPTER n. The Species of Utility 10 

The classification of the relatively homogeneous is not impos- 
sible — Familiar divisions of utility: Positive and negative; 
marginal, super-marginal and free; direct and indirect — Three- 
fold relation of goods to satisfaction: (1) independent; (2) de- 
pendent on other goods; (3) dependent on other persons — 
Definition of utility proper — Particular utility — Comple- 



X CONTENTS 

mentary utility — Dependence of the utility of a good upon 
other goods not to be taken in its broadest sense — Imputed 
utility — Transputed utility — Its relation to relative scarcity — 
Transputed utility diflferent from other non-particular utility — 
Opposed to utility proper when the latter is on the same level 
— Adventitious utility — May appear in the complementary 
relation — The socio-psychical factor — Both transputed and 
adventitious utility presuppose economic value — Utility 
classified as processive and existential — Multiple utility — 
The relations of these species of utility reviewed. 

CHAPTER III. The Law of Diminishing Utility . . 20 

Diminution of utility is not the only type of quantitative 
variation — What constitutes a supply from this viewpoint — 
Homogeneity is essential — Diversity and precedence, not the 
character of the supply, account for the regular diminution of 
utility — The diminishing rate of diminution — The abrupt ter- 
mination of the curve (only an apparent exception) due to 
neglected costs — Possible relation of diminishing utility to 
general psycho-physical law — But quantity of feeling differs 
from intensity of sensation — Weber's Law states exactly the 
presiunptive form of the curve — Description and characteriza- 
tion of Diagram II, showing the normal curve of regular dimi- 
nution of utility — It is a rectangular hyperbola, that is, its 
equation is xy=c — Proof and construction of the ciu-ve — 
Since initial utility is seldom infinite, the axis of ordinates is 
usually at the left of the initial point of the supply — The con- 
stant-outlay curve — Abstract character of the normal law — 
Actual curves seldom normal, but never straight lines. 

Diagram I. The apparent form of the curve of diminishing 
utility when account is taken of such costs as are neglected until 
marginal utility is small 27 

Diagram II. Normal curve of diminishing utility constructed 
according to the psycho-physical law as a rectangular hyperbola 28 

CHAPTER IV. The Scope and Limitations of Di- 
minishing Utility 40 

Bearing of the psychological principle of accommodation 
upon initial utility — The necessity of immediate consumption, 
which is presupposed in case of negation of utility through 
satiation, is not to be regarded as the usual condition — The 
moderating effect of substitution upon the diminution of 
utility — The relative and economic (not physical) character 
of the homogeneity of a supply — All goods are, for certain 
purposes, reducible to money — Increase of property in general 



CONTENTS ri 

may likewise be viewed as subject to diminishing utility — But 
theoretical diminution may become practical limitation — The 
oneness of a want no criterion for defining a supply — The case 
of a single good embodying a series of utilities — Its obscuring 
efifect on diminishing utility — From a social point of view even 
such goods as are isolated in actual consumption exhibit regu- 
lar diminution of utility — The difficulty with discontinuity 
vanishes in the case of a social curve — The demand curve 
considered as in part a summation of utility curves — The in- 
dividual's demand curve has the same form as his utility curve 
— The summation of rectangular hyperbolae — Meaning of the 
scales — Qualifications — Distortion resulting from possible 
differences of slope — "Diminution at a diminishing rate" still 
holds in any abstract case — Technical meaning of "diminish- 
ing rate " — Practical value of the conclusion as regards sum- 
mation — But degree of utility cannot be read back from a so- 
cial demand curve — The law of diminishing utility as applied 
to an abstract element of utility embodied in commercially dif- 
ferent goods — Generally abstract character of the principle. 

Note on the commensurability of all sorts of satisfaction ... 44 

CELAPTER V. Peocessive Utility and Existential 
Utility 58 

Double reference of the term consumption — The destruction 
of goods incident to consiunption is of fundamental economic 
importance — But it is in some cases not necessary to enjoy- 
ment — The uses of such goods tend to be free — The destruc- 
tion is sometimes intended, hence two sorts of consumption 

— Processive consiunption and processive utility defined — 
Existential utility — Objects of eesthetic appreciation have 
such utility — Objects of existential utility may deteriorate, 
but not because of their enjoyment — This distinction not 
entirely parallel with that between perishability and durability 

— Economically perishable goods a smaller circle within those 
having processive utility — Physical perishability not incon- 
sistent with existential enjoyment, but inimical to it — Physical 
and economic dm-ability combined constitute the condition most 
favorable to a large amount of existential utility — Destruction 
of utility has an important but also a variable place in consump- 
tion. 

The relation of these distinctions to saving — Saving in con- 
crete goods, as opposed to pecuniary investment — High possi- 
ble efficiency, or economy, in a subjective income consisting of 
existential utility — The relation of ownership to superior cul- 
tivation of land — The capitalistic ownership of articles of con- 
sumption is especially bad — Saving in concrete goods is the 
most fundamental and the most desii-able form of saving. 



3di CONTENTS 

CEL^TER VI. Rate of Consumption m Relation to 
DzMiNUTioN of Utility . 68 

Importance of rate of consumption in relation to diminution 
of utility — Failure in ordinary illustrations to take account 
of futiure uses — High perishability, physical even more deci- 
sively than economic, compels a high rate of diminution — Sub- 
stitution and preservative measures as means of partial escape 

— Physically perishable goods ministering to existential wants 

— Elasticity of demand is only partly a phase of rate of diminu- 
tion of utility; the expansion of demand often not sufficient to 
encourage the lowering of price — How high rates of diminution 
are veiled for the city-dweller. 

Storage or preservation of goods makes time a factor in the 
rate of diminution of utility — Economic perishability means a 
high rate of consumption — But restricted utilization and rapid 
diminution of utility may be evaded by storing — Postponing the 
use of part of a supply (distinct from costs of keeping) has thus 
an effect on diminution of utility — Discounting for futiu-ity of 
use may be the only reason for diminution — Illustration of 
future discount — Where consumption is processive and goods 
are not physically perishable. Utility apart from costs need 
never become zero — Check from lack of room for storage in the 
city — Exchange as a factor — Abundance fosters a preference 
for soUd and durable goods and for existential utilities — Time 
discount a factor in the diminution of the utility of most goods. 

The case of existential utility embodied in goods absolutely 
durable physically, i.e., with a zero rate of consumption — As 
regards diminishing utility this case not complicated by time 
discoimt — An analogy — Rate of diminution for such goods 
not necessarily but probably low — Rates of supply contrasted 
with amounts supplied once for all — Future discoimt the link 
between the two sorts of supply — Concrete cases are mixed — 
Order of preference between different sorts of goods — Risk an 
independent question. 

Conclusion: Rate of diminution of utility is affected by rate 
of objective consumption as well as by need or subjective factors. 

CHAPTER Vn. The Complementary Relation ... 83 

Variety and utility — Refinement in consumption — Diver- 
sity of use intensifies effectiveness — Partly a contrast effect — 
Heterogeneity of goods the opportunity for obtaining comple- 
mentary utility — The man who wants more wants, not only 
different things, but complements — Increasing utility a possi- 
ble effect — The joint utility of complements does not conform 
to the principle of diminishing utility — The Austrians con- 
sider the complementary relation of productive agents only — 
Illustration of the complex character of relations of goods to 



CONTENTS xiii 

each other — Complementary utUity in household economics — 
Comfort — Why mere sumptuousness is bad. 

Heterogeneity practically, if not logically, necessary to the 
complementary relation — Group utility more than a mere con- 
trast effect — The complementary relation is of more than 
merely economic interest. 

CELAlPTER Vm. The standard of Lite as based upon 

COMPLEMENTAEY UTILITY 91 

The standard of life is a case of the complementary relation — 
Why, when destroyed, not easily reestabUshed — Economic 
environment in relation to the standard — The disadvantage 
of a cheap staple food — High ratio of cost of manufacture to 
cost of raw materials imf avorable to a high standard — Rela- 
tively cheap food less desirable — Illustration of the effect of 
relative costs upon the character of dwellings in coimtry and city 
— The demand for decencies — A vis a tergo also helps to sus- 
tain a high standard of life. j 

Incidence of economic conditions upon the family — Its eco- 
nomic function now is the care of consumption — The transmit- 
ting medium for a high standard of life — The dynamic char- 
acter of this subject. 

CHAPTER IX. Complementary Utility m Relation 
TO THE Variation op Utility 98 

The importance often attached to goods essential to one's 
standard of life constitutes an exception to the regular diminu- 
tion of utility — This supposes income in general is reducible 
to a common denominator — Diminishing utility holds of par- 
ticidar utility regardless of heterogeneity of goods — But it need 
not hold of complementary utility — Typical curve of dimin- 
ishing utility — Effect of the introduction of complements on 
the curve of the variation of utility — Physical identification of 
the last imit or definite assignment of its utility no more essen- 
tial than for the first or initial unit — Complementary utility 
cannot be obtained in the largest doses with the earlier units — 
Illustration by the elements of a dinner — Suppose extreme 
himger — Suppose moderate hunger and patience — The com- 
plementary relation between successive goods — Suppose each 
unit chosen as if the last obtainable — Personal idiosyncracy a 
comphcation — Complementary utility may be of great impor- 
tance for the variation of utility without causing increasing 
utility; illustrative curve — Consumption groupings are elastic 
and some complementary utility is usually in prospect — In 
matters psychical 2+2 may, in a sense, sometimes equal 4 but 
are just as likely to equal 3 (diminishing utility) or 5 (the com- 



sdv CONTENTS 

plementary relation) — The somewhat dynamic character of 
complementary utility — Accidents have obscured the effect 
of complementary utiUty on variation — Diminishing utility 
the more objective in its natiu-e — Always underlying — Holds 
unquaUfiedly for particular utility — Transient character as 
well as exceptional occurrence of increasing utility — Groups 
themselves, though like, cannot in practice form a supply — 
Unlike groups do not constitute separate units but are them- 
selves grouped — Complementary utility is not amenable to 
marginal or market conception — Its possibilities not imlim- 
ited — It is of as great practical importance as are the results of 
diminishing utility. 

Diagram III. Possible effect of complementary utility upon the 
variation of utiUty producing increasing utility 101 

Diagram IV. Possible effects of complementary utility upon the 
variation of utility amounting to less than increasing utiUty . 102 

CHAPTER X. Imputation and Transputation of 
Utility 114 

Imputed and transputed utility are somewhat different in 
relation to complementary utility — Distribution a problem in 
imputation — Phases of this problem — Conception of impu- 
tation brought over into consumption — What the term con- 
notes — Imputation applies to immediate as well as to intermed- 
iate goods, but the former application b distinctive enough to be 
given a separate name, transputation — Transputed utility as 
opposed to utility proper — To merely complementary utility — 
Transputation as unbalanced attribution of utility — Character 
of the criterion — Value is primary in transputation as well as 
in imputation — Character of the variation of utility under the 
influence of transputation — Two sorts of scarcity — Case of 
goods deprived of value by transputation — Illustrations of the 
effects of transputation — Elasticity in relation to it — Inse- 
curity of high transputed value — Replacement and substitution 
as limitations upon it. 

CHAPTER XI. The Transputed Character of the 
Initial Utility of Necessaries 125 

The supposed high degree of initial utility of necessaries — 
The logic of the valuation of means — The value of life — The 
value of means of preserving life — Instinctive imputation to 
necessaries — Character of the utility of increments of income 
at various stages — Satisfaction comes chiefly from free income 
— Free income more important than necessaries — NormaUy 
mere necessaries have little real utility. 



CONTENTS XV 

CHAPTER XII. Contrasted Significance of Merely 
Complementary Utility and Transputed Utility . 131 

Contrast between transputed and merely complementary util- 
ity as regards their relations to welfare — The former a part of 
complementary utility definitely apportioned to one or more 
members of a group — Merely complementary utility is super- 
marginal — Flexibility of groups helps in maintaining this — 
Replaceability bears no relation to amoimt of complementary 
utility, but much to that of transputed. 

Unimputed complementary (super-marginal) utility may 
indirectly aflFect demand and value — Analogy of the rent of 
land — Somewhat dynamic character of the influence — Deter- 
mining power of marginal increments possibly overrated — An 
article that is unique (whose supply for the purposes of a con- 
sumer =1), and therefore marginal, will usually have utility in 
excess of its economic value (marginal utility in the market) — 
Complementary utility is either imputed and transputed or else 
super-marginal — A complementary group is usually imique in 
a particular private economy, and this favors the super-marginal 
character of its distinctive utility — Economic uniqueness, also, 
of goods recurrently needed and received. 

Unimputable utility — Degree of economic value in general, 
as well as in the case of transputed utility, not a measure of 
the favorableness of the environment to man, but rather the 
opposite. 

CHAPTER Xin. The Nature of Adventitious Util- 
ity 141 

Definition of adventitious utility — Luxury, though related, 
too vague to be identified with it — How different from other 
species of utility — No form of curve specially appropriate to 
it — Its socio-psychical origin does not bar enjoyment by the 
consumer as if it were due to intrinsic qualities — Psychical 
parasitism characteristic — Illustration in the value of the 
diamond — Love of distinction in its economic expression — 
Relativity of all quantitative judgments the soil of adventitious 
utility. 

CHAPTER XrV. SocLAii Phases and the Economic 
Status of Adventitious Utility 146 

Adventitious utility a socio-psychical phenomenon — The 
class standard in consumption — Middle class sacrifices to 
"keep up appearances" — The breaking down of class stand- 
ards — Fashion is essentially conf ormism — Adventitious util- 
ity ia the cause of changes of fashion — Adventitious exploita- 



xvi CONTENTS 

tion of personal services — Objectively immoral character of 
adventitious consumption — Socio-economic evil — But largely 
of the nature of personal vice — Value without utility — Mer- 
cantile exploitation of adventitious motives — Taxation of 
adventitious utility — Progressive elements in all waste — The 
variation of adventitious utility protean — The demand is 
quantitatively insatiable — Yet the net subjective effect for 
society remains naught. 

CHAPTER XV. Hosts and Masks of Adventitious 
Utility 155 

Host and parasite — The parasite must usually conceal its 
true character — Esthetic enjoyment as a mask — Comple- 
mentary effects in art a cover — The complementary use of 
the rare — Exaggerated esteem of rare articles — Genuineness 
improperly associated with rarity — A wrong view of substi- 
tutes — The "best quality" is relative to the purpose in view 

— It is not the rare — Perversion of economy — Natiu-al differ- 
ences versus imitations intended to deceive — The best should 
be husbanded — Emphasis on "fineness" of quaUty chiefly ad- 
ventitious — Elegance only an extrinsic association with rarity — 
Adventitious elements permeate the economic estimation of 
all things that require much expense or much leisure — The 
situation into which adventitious utility enters is always mixed 

— The immorality of the material and exclusive superlative. 

CHAPTER XVI. Multiple Utility 163 

Multiple utility defined — Public service — Analogy of mul- 
tiple with existential utility — The less strict idea of multiple or 
collective utility — The inducement to socialize enjoyment — 
Relation to equality — Public property has reference largely to 
multiple utiUty — Ability or inability to pay for use not always 
decisive of economy — Sometimes the state may well change an 
economic into a free good, e.g., education — Public health — 
Transportation more clearly of direct pecuniary benefit to the 
individual — Diu-ability of public works — Monumental public 
edifices — Unimputable multiple utiUty of the natural environ- 
ment — Rate of exhaustion of minerals more properly left to 
private interest — "Conservation" — Public luxury — Appar- 
ently disproportionate expense of public celebrations and fes- 
tivals less so by reason of its multiple character — Possible 
quasi-complementary quality of public luxury — Royalty and 
nobility as surrogates for the people in consumption — Then 
not merely selfish — Democratic feeling fatal to this — A richer 
development of both multiple and individually enjoyed utility 
in prospect. 



CONTENTS xvii 

CHAPTER XVII. The Vakiation of Utility in Re- 

liATION TO CoNSUMEk's ReNT, INDIVIDUAL AND 

Social ' 173 

Consumer's rent a result of the variation of utility — Why 
"rent" rather than surplus — Not measurable in money — 
The possible transputed utUity of an article no part of its con- 
sumer's rent — Tendency of untransputed complementary util- 
ity to escape commercial valuation — Unimputable utility also 
escapes — Definitions of consiuner's rent in its various aspects 

— Relation to total capacity to enjoy — Danger of imlimited 
acquisition. 

Expansion of income in relation to consumer's rent — The in- 
dividual's progress into civihzation — Significance of the stages 
as also representative of present social strata — External re- 
straint upon expenditure wholesome — Place of existential util- 
ity — The middle situation best — At the top among incomes 
aTe the vanities of adventitious utihty. 

The average income of society — Money even less applicable 
to the measurement of social than of individual consumer's rent 

— Characteristic wastes and economies — Adventitious utility 
negative — Multiple utility positive — Abimdance with equal- 
ity unfavorable to adventitious and favorable to multiple util- 
ity — Inequality brings the opposite eflFects — Importance for 
consmnption, and for social economy, of the distribution of 
wealth — The greater the proportion of medium-sized incomes, 
the greater are utUity and consumer's rent — Utility of free 
time — Economics teaches restraint upon individual accumula- 
tion. 

CHAPTER XVm. Op Certain Practical Applica- 
tions 184 

The practical application of the foregoing theory a secondary 
consideration — Diminishing utility as appUed to the accumu- 
lation of riches too mild a statement of the truth — "The chief 
enjoyment of riches consists in the parade of riches" — Sumptu- 
ary laws useless — Philanthropy — Resulting possibility of 
inverse selection of the richest — Value to society of the inher- 
itance of property — Possible modification of the institution in 
relation to the justification of the right of private property — 
Adventitious ambitions not confined to the rich — Waste of 
possible utility in a different way at the other end of the social 
scale — Why this latter situation is less easily disposed of — 
Futility of computing the economic value of a man — Democ- 
racy — The golden mean. 



INTRODUCTION 

WELFARE AND UTILITY 

The title of this essay, " Welfare as an Economic Quantity," 
should give some notion of the interest and importance of 
its subject. Welfare comprehends or represents all things 
of reasonable and rightful desire. Its economic foundations, 
it is true, may seem less interesting. This very fact is pre- 
sumptive evidence that the dependence of welfare upon 
economic conditions has not received the attention it de- 
serves. Welfare, or a large part of welfare, is, in mathemati- 
cal parlance, a function of the control of economic goods. 
In other words, the quantity or degree of welfare depends 
in large measure upon economic goods and upon the use 
made of them. It is the writer's purpose to contribute 
something toward an understanding of this quantitative 
relation between goods and welfare. 

If it were desirable to make the title also a definition of 
the subject, it might read, "Kinds of Utility and their 
Variation." This is technically more accurate, but also 
less generally intelligible than the other. Such a tech- 
nical label does not do justice to the human interest of 
this phase of the study of economic consumption. 

It is not to the purpose to discuss in this essay the nature 
and essence of welfare. It suffices to make explicit the as- 
sumption that welfare is an all-round satisfactory state of 
being, securely grounded in material and economic as well 
as other elements. The idea is properly associated with 
that of a sufficiency of economic goods, though the state 
is not thus simply constituted. Some will be inclined to 
beg the question at this point, chiefly those sheltered ones 
who do not know what it is to do without any necessary 



XX INTRODUCTION 

or convenience. Any one who believes that the essence of 
welfare is a state of mystic contemplation or something 
else equally ethereal will not care to read what follows. 
Such a one must first learn something of the elementary 
relations between life and work with which economics 
deals. 

The economic term "utility," rather than the more 
general and popular word " welfare," is commonly used in 
the following pages because the former is well established 
in the terminology of economics and has a definite special 
meaning. The relation between the two is roughly indi- 
cated by considering the utility of anything as a part or 
element of that of which welfare is the whole. Incidentally, 
the concrete utility is thought of more objectively as in- 
hering in goods. Welfare is collective and general and there- 
fore comparatively abstract. At least it is not thought of 
as limited by persons and conditions. But utility also is 
general, or generalizable, and only figuratively the "prop- 
erty" of particular goods. We do speak of the utility of 
goods and of the welfare of men, but this difference of 
usage may be merely a matter of viewpoint and emphasis. 

Welfare, it may be said, is properly a collective term 
for satisfactory or pleasant states of mind or for such of 
these as are duly grounded in or accordant with objective 
conditions, and thus more or less permanent. Since utility 
is the more objective counterpart of satisfaction, it would 
seem that welfare is a sum or system, not of utiUties, but of 
the corresponding satisfactions. In other words, if welfare 
is subjective and utility objective, the latter cannot be 
described as a part of the former. In fact, however, welfare 
is not thought of as a merely psychical state or subjective 
quantity, nor is utility thoroughly and completely objec- 
tive. Perhaps the variable and seemingly loose use of these 
words is justified by the parallelism that obtains, in a more 
general sense than is technically denoted, between the 
physical and the psychical. Where capacity is so variable 



INTRODUCTION xxi 

and conditional a matter it may not be possible strictly to 
discriminate between the capacity to satisfy and the result 
of the manifestation of that capacity. 

It may be said, even by those who acknowledge the in- 
terdependence of the two, that welfare is a psychical or 
subjective quantity and not an economic quantity. Classi- 
fications emphasizing exclusion, however, are apt to mis- 
lead. Doubtless welfare is primarily psychical. The phrase 
"an economic quantity," moreover, should be taken in a 
restrictive sense, leaving some elements of welfare ad- 
mittedly not economic. For the rest we may insist that 
whatever is controlled by economic means and regulated 
by economic motives is in so far economic. A psychical 
quantity is often in this sense also an economic quantity. 
Welfare is most certainly an economic matter, though not 
exclusively such. But welfare is just as certainly not a 
commercial matter. That is a much smaller circle within 
the general field of the economic. Commerce and welfare 
do not have so direct a connection in practice that we must 
inevitably connect them in thought, though economics is 
concerned with both. 

Welfare may be thought of as either primarily individual 
or primarily social. That the word tends to connote social- 
ity is natural. Society is a multitude of individuals the well- 
being of each of whom is dependent upon that of the others. 
Utility might also be considered a social phenomenon, but 
in the study of utility we must devote most attention to 
the concretely conceived good or collection of goods as over 
against the equally concretely conceived individual or 
group of individuals. The social viewpoint is therefore 
naturally pushed forward to another stage of thought. It 
is not often that the group of consumers is large enough 
itself to constitute a society. Multiple utility, to be dis- 
cussed later, is an important exception. But the economist 
generally leaves the final stage of social synthesis to others. 

." Wealth " and " welfare " are correlated with each other. 



xxii INTRODUCTION 

There is a direct, though not a simple, quantitative relation 
between them. As a supply or collection of goods, that is, 
wealth, varies in quantity or content, the utility of the goods 
to their possessor, their potency for welfare, also varies. 
The changes in the goods may be either quantitative or 
qualitative. The correlated variation of utility, at least in 
so far as economics is concerned, will be quantitative only. 
The necessary foundation for a theory of economic con- 
sumption would seem to be a law or laws of this quantita- 
tive variation of utility. We are familiar with one such 
law, that of diminishing utility. But economists have not 
paid much attention to this as a phase of economic con- 
sumption. They have immediately put the principle to 
ulterior use for the explanation of value and of market 
transactions; hence they have failed to give any adequate 
account of the variation of utility as such. It is the chief 
purpose of this essay to develop a more comprehensive 
theory.^ 

There are different kinds of utility and the type of varia- 
tion is not the same for all. These kinds of utility have 
scientific interest and social significance apart from the 
character of their variation. Yet we can scarcely say that 
anything important about utility is quite unconnected with 
its quantitative variation. That which is socially signifi- 
cant in the field of consumption must be so in relation to 
social economy. "Social economy" here means the good 
management of the material and other means of satisfac- 
tion. The clue to good management in consumption lies 
in the relations between quantity of goods and quantity 
(or degree) of satisfaction — in just this problem which is 
to be solved by the formulation and application of the 

^ If circumstances favor the writer's further study of economic con- 
sumption, the related topic next attempted will be personal services. 
This should include some consideration of the general bearings of the dis- 
tinction between derivative and original income, as well as a discussion 
of the character and the social reactions of this class of immediate utili- 
ties. The scope of the present study is intentionally restricted. 



INTRODUCTION xxiii 

principles of the variation of utility. In this direction, for 
example, lies the answer to the question as to the effect 
increased concentration of wealth may be expected to have 
upon utility and welfare. 

That welfare is exclusively dependent on economic fac- 
tors is a proposition scarcely to be maintained except in a 
partisan spirit. But it is possible to be equally dogmatic 
and a good deal more vague in maintaining the extreme 
opposition of the "materialistic view" of history and life. 
The moralists have not often conceded to the economists 
all that belongs to them in the field of the study of welfare, 
perhaps because the economists have themselves usually 
been inclined to claim too little here. The latter have been 
too anxious to steer clear of moral problems. Though wel- 
fare is not dependent exclusively on economic factors, it / .^ur-J^ 
is, let it be repeated, a matter of economics as well as of 
ethics. That the subject is difficult is no reason why the 
economists should surrender it entirely to the moralist. 
The economist should follow his clues wherever they lead. 

The argument of this essay does not turn aside when it 
encounters a problem in morals, but, on the other hand, 
neither does it attempt to pass judgment. It is intended to 
be merely a contribution to economic science. If it also has 
bearings on practical problems, so much the better. But 
such practical bearings are quite incidental to its main 
purpose. The writer, however, would not appear to hesi- 
tate to draw any legitimate conclusions that follow from the 
explanatory principles discussed. He does not suppose that, 
because his purpose is to explain, and not to justify or to 
rectify, he can therefore avoid moral issues. But he does 
not undertake to deal with them in the completeness neces- 
sary for full moral judgment. To do this it would be neces- 
sary to take into consideration facts lying beyond the scope 
of economic study. Economics cannot claim to see all things 
whole. If ethics comprehends knowledge of root and all, 
and if it may thus claim to be entitled to judge finally, then 



xxiv INTRODUCTION 

its students ought to pay more attention to economics than 
they have done hitherto. 

Of the following chapters it is unfortunately true that 
the earlier ones are the most abstract. They will, therefore, 
be the least interesting to most readers, and they are also 
the least significant. Chapters i and ii are almost exclu- 
sively occupied with the ungrateful task of defining and 
of qualifying definitions. Chapters iii, iv, and vi deal with 
diminishing utility. This subject has become, as regards its 
fundamentals, a commonplace of economic analysis. But 
these chapters do not dwell upon the commonplace phases 
of diminishing utility and are indeed developed to a degree 
of abstraction for which the principle excuse is that they 
thus serve better as a counterpart for what follows. The 
conception of the nature of saving which is incidentally 
developed in chapter v is of some independent interest. 
The three chapters on complementary utility, that is, 
chapters vii, viii, and ix, not only correct the ordinary 
conception of the variation of utility as simply diminishing 
as the supply of goods increases, but also come fairly close 
to the concrete facts of life and enjoyment. The next chap- 
ters, X, XI, and xii, deal with transputation and present the 
darker aspect of the interdependence of goods upon one 
another. If the transputation of utility smacks of pessi- 
mism, the theory of adventitious utility, set forth in chap- 
ters XIII, XIV, and xv, might well serve as a school of cyni- 
cism. Chapter xvi deals with an especially social, some 
would loosely say "socialistic," phase of consumption and 
enjoyment. Chapter xvii attempts to gather into one whole 
the results of the different sorts of variation of the sub- 
jective effectiveness of goods for social welfare. The con- 
cluding chapter, numbered xviii, draws the moral. But 
such practical application is merely an incidental function 
of a scientific essay, though it is of course more interesting 
than abstract explanation. These practical conclusions are 
only briefly touched upon, not fully discussed. 



INTRODUCTION sxv 

It is the fate of the student of the social sciences to be 
abstract even where he is least willing to be and where he 
may perhaps be inclined to ignore the fact that he is so. 
The writer has preferred to let his abstractness be explicit. 
One general assumption, however, may well be here dis- 
posed of once for all. The variation of utility and the wel- 
fare of the consumer doubtless depend quite as much upon 
the consumer as upon the goods he consumes. And the 
consumer is a creature of volition. We therefore have to 
assume that he is on the average somewhat reasonable in 
his choices if we are to derive general principles determining 
the variation of utility and the relation of goods to welfare. 
We assume, in other words, that the painter's pigments 
must be "mixed with brains" in order to obtain the effects 
desired and expected. This essay does not undertake to 
discuss the quality of men, though it is granted that there 
is nothing of greater importance in relation to the effective- 
ness of material as well as of immaterial means of welfare. 
The argument assumes a tolerably good average level of 
intelligence and self-control. In thus leaving to one side 
questions as to the quality and variability of human nature, 
the part exhibits the character of the whole. Economics 
is not a comprehensive science of human nature and social 
relations but an abstract study of a certain class of individ- 
ual acts and correlated social phenomena. The study of 
economic consumption will naturally avail itself of the 
same prerogative of being abstract. 



WELFARE AS AN ECONOMIC 
QUANTITY 

CHAPTER I 

UTILITY DEFINED 

Economics is the study of the means of welfare, that is, 
of goods and services, or of things and processes having 
utility. Whether utility be considered cause or component 
of weKare is a question that need not be settled here. An 
increase of utility normally contributes to welfare. For 
reasonable beings the more utility there is available, the 
greater is welfare. The detailed relation between these two 
variants is the subject-matter of the portion of economics 
that deals with consumption. The corresponding relation 
between utility and its physical conditions and causes, 
similarly considered as variants subject to control, con- 
stitutes the field of economic production, including the 
creation of place- and time-utilities as well as element- 
and form-utilities. Thus viewed, the study of consumption 
is chiefly concerned with utility and its variation. The 
first step in such a study is the definition of utility. 

Utility may be defined as the capacity in greater or less 
degree to satisfy wants. It is a favorable or desirable re- 
lation of an external thing or its processes to pleasant or 
agreeable states of mind. The student of economics does 
not need to be told that the agreeable and the ornamental 
possess utility quite as truly as does the "usefuL" Things 
having utility constitute as miscellaneous a class of impor- 
tant and trivial objects as can well be conceived. A child's 
lollipop, a paved public street, a splinter of the "true 



2 WELFARE AS AN ECONOMIC QUANTITY 

cross," a sturdy sunflower, the Koh-i-noor diamond, a glass 
of lemonade, green and red-flowered wall-paper, a hot bun, 
a graduation diploma, a waft of perfume, all these yield 
satisfaction and are included among the things having util- 
ity. Peculiarities and limitations of this conception of util- 
ity will appear in the course of our examination of its kinds. 

The term utility is also used to designate the qualities 
by reason of the possession of which certain concrete things 
and acts are constituted goods and services. But utility is 
predicated of a good or of a service only in relation to 
human wants and satisfactions, though the latter may be 
several degrees removed from the primary uses of the 
object. A good is said to have this or that utility with ref- 
erence to the wants of some more or less definite person or 
persons. The relation to the psychical or the subjective 
is essential to the nature of utility. 

It might better be said that a good has so much utility. 
For utility is always thought of quantitatively. There is 
always present at least an implied or latent quantitative 
comparison with the utility of other goods. "More" or 
" less " is the essence of quantitative judgment. This sort of 
comparison will be made where there can be no absolute 
and definite determination of quantity. 

When reference is made to the utility of a good, the 
speaker may possibly more or less consciously limit his 
conception to some one particular use, presumably the most 
appropriate use to which the good may be put. If one use 
is exclusive of any other and is exhaustive of the good's 
power to satisfy, such limitation is inevitable. A plate of 
hot baked beans serves only one purpose and can be used 
only once. The utility of a chair is different. It may be 
used by several persons in turn. Its utility is therefore a 
multiple of the advantages obtained from it by one sitter. 
But that is not all. Not to speak of the various more or less 
reclining postures which the body may assume in a chair, 
it may be found convenient occasionally to use the chair to 



UTILITY DEFINED 3 

stand on in order to get something otherwise out of reach. 
The family ironing may be done on a board resting more or 
less securely on the backs of two chairs. It is perhaps en- 
tirely defensible for some purposes to think of the utility 
of a chair abstractly as proportionate only to the satisfac- 
tion to be derived from its primary use for sitting. But the 
posture for which the chair is built is a merely physical 
matter. Such a basis would scarcely seem to be the best 
one for the delimitation of a good's utility as contrasted 
with the definition of the good itself, the good being merely 
physical while the utility is a psychical fact. If we pass on 
to the viewpoint of the less external condition of satisfac- 
tion, we find the sitting posture itself has a great variety of 
uses. After eating one may sit in order the better to digest 
one's dinner. One may sit in order to write conveniently 
at a table. One may sit in order to rest one's feet and legs 
by distributing one's weight over a greater surface. To use 
the chair to increase one's available height is but a step 
farther away from its physical design. It is thus most 
natural to think of the utility of a chair in a collective sense, 
as incorporating the potential benefits of all the various 
uses to which it may possibly or reasonably be put. Is some 
single one of the multifarious uses to which a boy's jack- 
knife is put the correct index of its utility? The use of a 
needle as a surgical instrument or of a bent pin for fishing 
may sometimes prove to afford no small contribution to 
utility. Indeed utility is ordinarily collective. Throughout 
this essay, unless otherwise indicated, the word is employed 
in this collective sense. If the consumer can add to or 
better the conventional and accepted uses of a good, he 
thereby increases for himself its utility.^ 

^ The Austrians think of varied possibilities of use as alternative and 
exclusive instead of supplementary. Cf . Bohm-Bawerk, Positive Theory 
of Capital (translation), 1891, book iii, chap. vii. But in the case of most 
durable goods the uses are actually in the main supplementary to one 
another, not exclusive. It is onb^ f^^r nrocessive uses (cf . chap, v, below) 
that the other view holds. 



4 WELFARE AS AN ECONOMIC QUANTITY 

A particular species of utility, thought of as characteris- 
tic of some one kind of good, is likewise potentially collective, 
even though the species itself be so narrow as ordinarily 
to refer to but one use of the good. The rest-giving utility 
of chairs, the warmth-preserving quality of bed-blankets, 
the "soporific virtue" of opiates, all seem narrowly limited, 
yet each is collective of various possible uses. The lounger's 
"pipe dreams" and the convalescent's recovery of health 
are not closely related, but the same chair may be the in- 
strument of both. Though a highly specialized civilization 
makes us ignorant of many of the possibilities of a tin can, 
it may be put to many other uses besides that of a water- 
tight or air-tight package. Even its uses as a mere con- 
tainer are multifarious. 

There is a species of utility which, because it is so 
thoroughly psychical in its nature, is narrow enough 
to refer to only one kind of use, though one to which 
almost any sort of good may be put. This distinctive 
and subjective species is adventitious utility, to the con- 
sideration of which several of the following chapters are 
devoted. 

"A utility" is often spoken of as equivalent to what we 
have called a use. In this sense the utility of a good is the 
algebraic sum of its practicable "utilities," in so far as they 
do not interfere with each other. Where two uses are exclu- 
sive of each other, as in the case of alcohol to be used either 
medicinally or for combustion, the preferred alternative 
use is the one to be included. 

Although, owing to the tendency to differentiation and 
specialization in any considerable stock of goods, auxiliary 
uses are ordinarily of little account, the purchaser never- 
theless judges a good synthetically, that is, with reference 
to all the uses to which he may care to put it. The skill of 
the retailer consists largely in calling to the buyer's atten- 
tion the auxiliary utilities which the latter is getting, or in 
concealing auxiliary .disutilities, until the sum of positive 



UTILITY DEFINED 5 

utility appears to the buyer to mount well above the margin, 
and so the purchase is made. 

As above remarked, if the consumer can add to or better 
the conventional and accepted uses of a good, he thereby 
increases its utility. The discovery of such different and 
new uses is one of the great progressive factors in consump- 
tion. It is much more important than the refinement of 
sensibilities that makes the connoisseur. The latter's con- 
sciousness of scarcely perceptible differences has the same 
sort of relation to wholesomeness and progress in consump- 
tion that the development of athletic contests has to health 
and eugenesis among the people, the correlation, so far as 
there is positive correlation, being in both cases quite 
indirect. 

Since it is chiefly the quantitative aspect of utility with 
which we are to deal, we cannot well stop at a qualitative 
definition. We must have a measure of utility, at least for 
the purposes of our thought. 

In the writer's conception, utility is proportioned to 
satisfaction. The utility of a good or supply is propor- 
tioned to the sum of satisfaction obtainable from the 
different uses to which it will be put. This proposition, 
however, is not to be taken without qualification. There 
are things which will be accepted in lieu of satisfaction, 
certain peculiar kinds of utility being thus constituted. 
From this broader viewpoint, therefore, contribution to 
satisfaction or what will be accepted in lieu of such contri- 
bution, is the conceptual measure of utility. 

The proposition that quantity of utility is equal to quan- 
tity of satisfaction requires only such qualification as re- 
sults from the generalized nature of utility.^ Satisfaction 
that is due to the idiosyncrasy of some one individual is, 
of course, not a sufficient foundation for a corresponding 

^ Substantially the point made by Seligman, article on "Social Ele- 
ments in the Theory of Value," Quarterly Journal of Economics, vol. xv, 
1900-01, p. 321. 



6 WELFARE AS AN ECONOMIC QUANTITY 

quantity of utility. The satisfaction must be susceptible 
of being experienced by others. Only so could utility be 
subject-matter for a social science. 

The generalized character of this satisfaction suggests the 
solution of another troublesome question. Is utility in pro- 
portion to experienced or realized satisfaction or to adjudged 
or expected satisfaction? It is, of course, in individual cases 
far from being exactly in proportion to either. It is in pro- 
portion to reasonably expected satisfaction. But such 
expectation is substantially identical with what has, in 
general, been experienced, and thus with what will, in gen- 
eral, be experienced. Barring accidents, and possibly al- 
lowing for the approximate nature of human notions of 
quantity, generalizable experience and reasonable ex- 
pectation are the same. Utility is fundamentally a relation 
of goods to satisfaction, but, as a quantity, it is also inci- 
dentally a judgment of that relation. 

There is to be observed an occasional inclination to 
confuse utility and subjective value, with a resulting ten- 
dency to perceive only such utility as is proportioned to 
marginal satisfaction, that is, the satisfaction afforded by 
the least esteemed use to which any portion of the supply 
of a commodity will be put.^ This goes against many ob- 

^ The reference is especially to F. A. Fetter, Principles of Economics, 
p. 26, as follows: "'Total utility' ... if it has any existence, certainly 
cannot be calculated. The diagram showing the curve of diminishing 
utility must be understood as representing indicatively at any given mo- 
ment but one marginal utility, the same for every unit of like goods. The 
other perpendicular lines are expressed in the conditional mood; they are 
what the marginal utility would be were the numbers of units different." 

Contrast this with Jevons, Theory of Political Economy, 2d ed., p. 56; 
"We may know the degree of utility at any point while ignorant of the 
total utility, that is, the area of the whole curve. To be able to estimate 
the total enjoyment of a person would be an interesting thing, but it 
would not be really so important as to be able to estimate the additions 
and subtractions to his enjoyment which circumstances occasion." On 
p. 87, Jevons identifies value in use with total utility. This would not be 
inconsistent with the employment of the term in a representative sense 
in relation to a single article, in fact as synonymous with utility. 



UTILITY DEFINED 7 

vious facts. Some articles of consumption — for example, a 
piece of furniture such as a piano or a cook stove, of which 
a family ordinarily possesses only one instead of having a 
supply of several similar units — commonly have utility 
clearly greater than their value. ^ On the other hand, if, 
under certain conditions of supply, the least important use 
to which a good will be put has no appreciable positive 
utility, but is merely the care-free wasting of it, such a good's 
marginal utility is nil. But goods without marginal utility 
are not therefore divested of all utility, else we must deny 
that such goods, which are free goods by reason of the 
abundance of their supply having given them a zero mar- 
ginal utility, are goods.^ But to be a good and to have util- 
ity are coextensive propositions. Things having marginal 
utility constitute a less extensive, included class. Similarly 
the marginal utility pertaining to the individual good thing 
may easily be much less than the whole utility of the ar- 
ticle in question. Moreover, if we must confine our thought 
to marginal utility, or to the utility corresponding to that 

^ Wieser, Natural Value, book i, chap, vm, discusses what appears to 
be a similar case, but a closer examination shows that he is treating of 
the economic value (not the utility) of goods that are dealt in as indivisible 
wholes, not those that are such for purposes of consumption only. 

2 Menger, Grundsatze der Volksmrtschaftslehre, 1871, p. 83, says: 
"Die nicht okonomischen Giiter haben demnach nicht nur keinen 
Tauschwerth, sondern iiberhaupt keinen Werth, und somit auch keinen 
Gebrauchswerth. . . . Der Tauschwerth sowohl als der Gebrauchswerth 
zwei dem allgemeinen Begrifle des Werthes subordinirte, also in ihrem 
Verhaltnisse zu einander coordinirte Begriffe sind, und demnach AUes 
das, was wir vom Werthe im Allgemeinen sagten, eben sowohl vom Ge- 
brauchswerthe als vom Tauschwerthe gilt." But it is evident that 
Gebrauchswerth is not here used as the equivalent of Adam Smith's 
"value in use." 

The formally logical phrasing of the passage from Menger is not con- 
vincing, since it does not reckon with the fact that value is a very broad 
genus, of which economic value, whether exchange value or subjective 
economic value, is but a species. To say that water, or that a pail of water 
just drawn to sprinkle one's flower bed, has no value in use, because one 
can get water, or another pail of water, for the trouble of turning a faucet, 
seems to the writer contrary to the sense of the English words and con- 
trary to common sense. 



8 WELFARE AS AN ECONOMIC QUANTITY 

which results from the least important reasonable use or 
set of uses for any unit of the available supply, we deprive 
ourselves of any standard of comparison not varying ar- 
bitrarily with the pecuniary means of individuals, since 
available supply varies with purchasing power. The mar- 
ginal utility of a pair of shoes or of a pound of candy varies 
from individual to individual as much as does the utility of 
a dollar. But the utility of shoes as such or of candy does 
not so greatly vary, because the satisfaction they afford, 
aside from idiosyncrasies of taste, varies comparatively 
little. 

This proposition as to the feeling equality of different 
individuals requires explanation and delimitation. Doubt- 
less sensibility, as evidenced by central feeling or affection, 
as well as with reference to pain stimuli, varies greatly from 
human individual to human individual. Therefore, it 
would be well to compare the feeling experiences of two 
individuals by reference to the relative position or rank of 
the feelings rather than in terms of measurement units. 
Probably we should never attempt to assign absolute values 
to the degrees of feeling of different individuals. But 
whether this holds or not, it greatly simplifies comparison 
to assume that the correct method is to equate the zero- 
mean or point of indifference of one individual's scale with 
the similar zero-mean of a different individual, other points 
being compared by way of relative distance from such 
means. ^ The proposition above enunciated supposes merely 
that the satisfactions of different individuals should be thus 
compared according to relative position, that is, as first, 
second, third, etc., or in a percentile scale.'^ 

Just wherein and why the higher ranges of the utility 
curve are peculiar and are intractable to current conceptions 
is considered in chapter xi, below, on the transputed char- 
acter of the initial utility of necessaries, and, though less 

^ This question comes up again at p. 176. 

^ Or by way of the terms of a binomial expansion. 



; UTILITY DEFINED 9 

directly, also in chapter xiv, on the economic status of 
adventitious utility. 

The absence of definite allocation of the utility that is 
in excess of marginal utility to one or more specific units 
of the supply causes such utility to be often ignored and 
sometimes entirely neglected by economists. We shall 
later see that the utility due to the suitable grouping 
of articles of consumption is little regarded for the same 
reason, because this species of utility also is not clearly 
and certainly the property of one concrete and definite 
good. But these utilities exist, whether amenable to com- 
mercial valuation or not. If a particular supply is reduced 
to a single unit, its utility clearly need not be merely mar- 
ginal for its possessor. It often is much greater than what 
corresponds to the price he would have to pay for it. Yet 
the fact that there are several units can scarcely be sup- 
posed to destroy whatever is in excess of the marginal ele- 
ment in the utility. Super-marginal utility remains utility, 
and is often the most fruitful or effective part of utility.^ 

^ Having in view the essential character of the phenomena of utility, 
one would rightly expect that "efifective" utility would mean utility that 
is effective for satisfaction. But in his Essentials of Economic Theory, p. 
7, Professor Clark makes "effective utility" mean utility that is effective 
for the determination of economic value. The analogy of "effective 
demand" explains this. But utility looks to satisfaction, not, as does 
demand, to the market. But, as is here curiously illustrated, the atten- 
tion of economists is not easily attracted Ip that direction. 



CHAPTER II 

THE SPECIES OF UTILITY 

The character of utility partakes of both the objective and 
the subjective. Hence it does not appear at first glance 
whether it can be subdivided into species. Objects and 
events that have utility are multifarious. Subjective 
satisfaction, on the other hand, is of homogeneous sub- 
stance. It is doubtful if we can at all divide and classify 
satisfaction as such. But we can deal with sources of satis- 
faction with reference to psychical effects as well as with 
reference to physical qualities, and therefore we can divide 
or classify utility. Though satisfaction is one, relations to 
it, or the sides from which it can be approached, are many. 
The same substance may be cut into many different sizes 
and shapes. 

There may be several classifications of the same group 
of things, all quite "natural" or organic in character. Thus 
utility is susceptible of more than one significant division. 
Some familiar ones are as follows: — 

Utility is positive or negative. Negative utility is the 
tendency to cause detriment or to detract from enjoyment 
and is usually distinguished as "disutility." 

Utility is marginal, super-marginal, or free — ideas to 
which the reader has already been introduced. The first 
is the utility corresponding to the least important reason- 
able use or set of uses for a unit good under given conditions 
of supply. Wants remaining constant, any unit of a given 
supply has the same degree of marginal utility as any 
other unit. 

Some units, though their physical identity cannot be 
fixed, have more than this degree of utility. The excess is 



THE SPECIES OF UTILITY ,11 

super-marginal utility. If we wish to distinguish other 
than marginal units of the supply as intra-marginal, then 
intra-marginal utility would be the utility individually 
and collectively possessed by these units. The amount or 
degree of utility possessed by one or more of such units in 
excess of that of the marginal unit is super-marginal 
utility. 

Free utility is the utility of free goods, which are those 
whose supply is so abundant relatively to wants that 
their marginal utility is zero. It might be considered a 
special case of super-marginal utility, that is, the case 
where marginal utility is zero, but the fact that the one 
relates to economic and the other to free goods makes it 
important to have separate and distinct terms. 

Utility is direct or indirect according to whether the 
good's capacity to satisfy is ripe and ready or whether the 
good is appreciated as a means to the creation of other ob- 
jective conditions of satisfaction rather than for itself.. 
Coal can directly affect one's enjoyment negatively by soil- 
ing things, indirectly and positively by being used to create 
warmth. The utility of the same object may be more indi- 
rect or less indirect, according to its destined use; the coal, 
for example, according to whether it is used as domestic 
fuel or as the source of power for a mill. The same distinc- 
tion is often indicated by the words immediate and medi- 
ate or intermediate. These classes of goods are also dis- 
tinguished as of first order and of higher or remoter orders. ^ 
An especially important phase of this distinction relates to 
the possibility of exchange, by way of which a good has an 
indirect utility corresponding to what it will fetch in ex- 
change for money or other goods. ^^ 

The above are of course cross-classifications or sub- 

^ Menger, Grundsatze, p. 8. 

2 Jevons {Theory of Political Economy, 2d ed., p. 76) would confine 
"indirect" to this sense and relate "mediate" utility to the stages of the 
productive process. But it is doubtful if such a distinction can be es- 
tablished as usage, even as technical usage. ^ 



12 WELFARE AS AN ECONOMIC QUANTITY 

classifications, each of great value for particular purposes. 
Below axe introduced certain further classifications which 
are as important as those just mentioned. It will be nec- 
essary, incidentally, to use and to define certain new terms. 
It would be well for the reader to bear in mind the fact 
that the definitions which take up the remainder of this 
chapter serve chiefly to introduce certain concepts to the 
understanding, whose significance can be fully appreciated 
only after reading the chapters to follow. 

The consumption of a good may be related to the satis- 
faction of wants in a threefold way. The good may possess 
quahties which are wanted for themselves. The relation is 
then simple and direct between the quahties of the good 
and the wants of its consumers. But the relation may be 
of a more complicated sort, not adequately accounted for 
in this manner. The good may be wanted for the sake of 
conjoint consumption with some other good. So far as this 
holds, the relation of the good to another good is the critical 
factor in its utihty and value. Of course the relation to 
wants continues to be fundamental; but it is overshadowed 
in the case of the part of the utility that depends on joint 
use. Still a third relation may dominate choice to the neg- 
lect of the other two. A good may be bought or consumed 
merely or chiefly on account of its bearing on the relations 
of its possessor or consumer to other members of society. 
The good may be a means of social distinction and may be 
appreciated for no other reason. Here the relation of the 
consumer to other men is the crucial point. The relation 
of such utility to satisfaction is derivative. 

These three viewpoints suggest the essence of the classi- 
fication of utility of which most use is made in this essay. 

Utility 'proper is due to the intrinsic qualities of a good, 
or group of goods, with reference to its relation, including 
the quantitative relation, to the satisfaction of human 
wants- 

If the good is used by itself, and if its degree of utility is 



THE SPECIES OF UTILITY 13 

not economically dependent upon associated or Joint use 
with other goods, its utility is altogether 'particular. Par- 
ticular utility belongs to a good apart from its consump- 
tion groupings. It is not derived from the group relation. 

If the utility of a good is in part due to association with 
other goods in consumption, the utility is in so far com- 
plementary. Such complementary utility of a particular 
good is a portion of the utility proper of the complete group 
to which the good belongs. Complementary utility is sub- 
ject to the influence of shif tings and rearrangements among 
consumption goods. Its distribution among the members 
of the group is also ordinarily indeterminate. But, as 
merely complementary utiUty, it is at any rate not notice- 
ably centered upon or monopolized by one or a few mem- 
bers of the group. 

These definitions may appear to be open to objection on 
the ground that they wrongly assume that a thing can have 
utility independently of its relations to other things. All 
utility, according to a possible interpretation of the defini- 
tions, is complementary. For example, the utility of the 
air or of its oxygen depends on the presence of combustibles 
in the body, and also the oxygen must be mixed with nitro- 
gen to dilute it for breathing. Conversely, the utility of 
food and of all other goods depends on the supply of air for 
breathing. This objection is perhaps best met on the prac- 
tical ground that, as a matter of ordinary experience, many 
such things will be available without care and may be 
assumed to be available as a matter of course. They need 
not be sought out or thought of, and their relations to the 
satisfactions obtainable from other things will not ordi- 
narily need to receive any consideration. But the writer 
does not wish definitely to confine the applicability of this 
classification of utility to technically economic as distin- 
guished from free goods. 

Circumstances may be such as to concentrate attention 
on one member of a group of goods. It may be obtainable 



n WELFARE AS AN ECONOMIC QUANTITY 

only on condition of imputing to it more than its propor- 
tion, possibly all, of the non-particular utility of the group 
in which it is to be used. This case may be distinguished 
as transputing utihty from the less regarded to the fa- 
vored one among the complements. In the later years of 
the First French Empire the utility and value of gunpow- 
der was mainly imputed to saltpeter because, with foreign 
supplies cut off, this ingredient was especially difficult to 
get. Transputed utility is due to a relation to other goods 
such that their full use and enjoyment is felt to be practi- 
cally so thoroughly dependent upon the control of the 
good in question that its utility is exalted and theirs de- 
pressed. Utility, or more utility, is transputed to the rarer 
complement in amount greater than would be attributed 
to it because of its other uses or merely for its own quali- 
ties. Instead of being shared proportionately, the comple- 
mentary utility of the group (a part of the utihty proper 
of the group) is chiefly or exclusively credited to one of its 
members. Transputation is a sort of monopolization of 
complementary utility, its abstraction from other comple- 
ments and concentration on one. "Transputation" con- 
veys the idea of such a carrying over or transference of 
attributed utility.^ 

The term "transputed" itself suggests the close relation 
of the conception to that of imputation,^ so familiar to stu- 
dents of Austrian theory. Transputation is a special case 
of imputation. Though properly more general, the idea of 
imputation, as it has in fact been used and may well con- 
tinue to be used, does not look beyond value to the utility 
that is its foundation, while transputation refers chiefly 
to utihty and consumption. The Austrian theory of impu- 
tation assumes that utihty has no practical significance 
apart from value, while the conception of transputation 

^ The term has been adopted, after much unavailing effort to find a 
better one, at the suggestion of Professor Johnson. 
^ Used by Smart to translate the German Zurechnung. 



THE SPECIES OF UTILITY 15 

recognizes the coordinate contribution of various members 
to a group-eflfect, and considers the concentration of group 
utility and value exceptional and its equitable distribu- 
tion normal. All complementary or non-particular value 
is imputed to group members, while transputed utility 
will seldom thus absorb all non-particular utility and may 
not be distinguishable at all. The one rejects while the 
other accepts the idea that the concentration of value by 
imputation does prejudice to other coordinate elements 
involved, though this difference may be due entirely to the 
difference between intermediate goods, so conspicuous in 
Austrian theory, and the immediate utiHty affected by 
transputation. Imputation relates to the attribution of 
value in production and distribution. Transputation is a 
result of the complementary relation in its bearings on 
economic consumption. Some further attention is given 
to the terminological question in a later chapter.^ 

Transputed utility is a result of the complementary 
relation plus relative scarcity of one or more of the com- 
plements. This relative scarcity is a matter of the quan- 
titative relations between the supplies of the different 
goods involved, and is to be distinguished from that 
scarcity which is the basis of marginal utility, the latter 
sort of scarcity being a matter of the quantitative relation 
between supply and recognized need. 

Non-particular utility proper is thus divided into merely 
complementary utility, or untransputed complementary 
utility, on the one hand, and transputed utility on the 
other. When the non-particular utility is equitably at- 
tributed to each member of the group, it is merely com- 
plementary. When one complement by force of circum- 
stances gets more than its share, the non-particular utility 
is transputed in whole or in part. 

Utihty proper includes ordinary complementary along 
with particular utiHty, but transputed utility relates to a 
1 Chap. X, footnote, p. 116. 



16 WELFAEE AS AN ECONOMIC QUANTITY 

different set of circumstances or a further removed point of 
view. The latter may be founded upon the larger comple- 
mentary relation between all the goods or experiences of a 
life. These are not subject to individual control or direc- 
tion, and therefore not of practical economic interest. Un- 
transputed complementary utility, on the other hand, is 
chiefly of significance for the smaller groupings of daily 
practice. The larger scope of the relation is not ordinarily 
given attention or else is problematic. The group within 
which utility is transputed is often more extensive than 
the particular goods occupying the attention, as in the 
case of the occasional excessive utility of necessaries dis- 
cussed in a later chapter.^ In order that there may be 
transputed utility, it is true, there must be some group re- 
lation further on — some group the utility proper of which 
is the ultimate ground for transputation. But the connec- 
tion may be effective through instinct and need not be 
the subject of conscious and rational economic judgment. 
The classification of utility as either transputed or else 
proper applies in strictness only for coordinate goods, the 
proper utility in question having nothing to do with that 
more or less indefinite relation of dependence which is the 
basis of the transputed utility. The transputed utiUty of 
a good is not to be set over against the proper utility of 
the group to which the same good belongs, but over against 
that of other members of the group, the utility of the 
group as a whole being on a different level. From the 
standpoint of terminology it might be preferable to oppose 
transputed and particular utility but for the fact that 
transputed utility need not absorb all the non-particular 
utility in the group, and because of the larger groups from 
which transputed utility may be derived. Particular and 
complementary utility, proper and transputed utility, have 
different limits and different division lines, except that all 
are contained within the limits of the utility proper of some 
^ See Chap. xi. 



THE SPECIES OF UTILITY 17 

group. The complementary relation and the utility due 
to it are the basis of imputation and transputation. But 
complementary utility is usually super-marginal and often 
free, while transputed utility is always economic value, and 
follows laws of value, and not merely, or even principally, 
those of utihty as such. But we must postpone further 
treatment of these rather complicated relations to later 
chapters. 

Utility may be classified on still another basis as either 
adventitious or non-adventitious. The writer can find no 
better term for the latter than utility proper. 

Adventitious utility is not due to the intrinsic qualities of 
the object nor to its complementary relation to other goods, 
but to a conventional social significance, in the view of the 
possessor and others, attaching to the possession and use of 
certain goods. Adventitious utility is due to relations 
between persons, and finds its expression, rather than its 
habitat, in the valuation and use of goods. This social sig- 
nificance of expenditure and consumption upon which 
adventitious utility is founded is not analyzed and thought 
out, or even thought of at all, by those who are active in its 
exploitation. It is conventional in nature and might be 
designated "conventional" utility but for the too general 
use and too broad implications of the word. Reflective 
analysis on the part of the consumer would usually be fatal 
to adventitious utility. 

Adventitious utility may also be complementary or 
transputed. But the complementary relation here reveals 
nothing new. Transputation, moreover, is unimportant in 
the field of adventitious utility, since the psychical charac- 
ter of the latter is very simple and at the same time, in 
its particular external expression, very fragile. Hence it 
cannot bear the strain of complex transputation, which is 
likely to initiate rational analysis and questioning. 

It is in connection with adventitious utility that the 
social or socio-psychical factor in consumption is especially 



18 WELFARE AS AN ECONOMIC QUANTITY 

prominent. The material for a comprehensive analysis of 
utility, therefore, or for a study of its variation, could not 
be supplied by the experience of a Robinson Crusoe. The 
adequate study of consumption is a task of the social 
sciences. 

Neither transputed nor adventitious utility can be pos- 
sessed by free goods. Both are dependent upon the limita- 
tion of supply which creates economic value. 

Another classification of utility is based upon the reac- 
tion of use and enjoyment upon a good's power to satisfy. 
If the furnishing of the satisfaction depends upon processes 
in the good which destroy its utility, that utility may be 
distinguished as processive in character. If the mere exist- 
ence and presence or the spatial relations of a good give 
satisfaction without involving impairment of its utiUty, 
the utility may be called existential. By reason of the 
processes whose occurrence or absence is in question, the 
good becomes or tends to become a different kind of 
thing, that is, not a good or less a good. In production 
the processes run the other way. In neither case can 
their direction be misunderstood. The importance of the 
distinction between these two classes of utility for econ- 
omy in consumption is evident. 

There is another sort of utility, somewhat analogous to 
existential utility. The latter affords enjoyment to an 
individual many times in succession without any loss of its 
power. Certain goods, largely identical with those possess- 
ing existential utility, and certain services may, without 
detriment to their utiHty, be enjoyed simultaneously by 
many consumers, instead of exclusively by one individual 
at a time. This is the case of multiple utility. 

We may briefly summarize as follows the relations 
between the various species of utility discussed. To be 
distinguished from utility proper is adventitious utility, the 
former being based on the relation of the quaUties of goods 
to men, the latter on the qualities of men and the relations 



THE SPECIES OF UTILITY 19 

between them. In contrast with utility proper from an- 
other point of view is transputed utility. Complementary 
utility as such is a species of utility proper. From the point 
of view of the complementary relation, utility proper may 
be divided into particular and complementary utiUty. 
The complementary relation is also the basis of trans- 
putation, but transputed utility is different from merely 
complementary utility in being value as well as utility 
and in being more or less monopolistic. Existential and 
processive utility are the terms of an independent cross- 
classification, significant in relation to the reaction of con- 
sumers upon goods. 



CHAPTER III 

THE LAW OF DIMINISHING UTILITY 

It is too often assumed that the diminution of utility — 
sometimes without regard to regularity in the rate, some- 
times with the impHcation that diminution proceeds at a 
diminishing rate ^ — is the one and only law of the varia- 
tion of utility. The writer does not deny the importance of 
this principle or even its primacy. He does beUeve that 
economists have in general been in too much haste to state 
the "conclusion of the whole matter" and so have left out 
of account everything but the final stage of the variation of 
utility. They have assumed that the principle of diminu- 
tion was universal and have not inquired into conditions. 
But they have at least made it unnecessary to argue and 
illustrate the fact of diminution of utility. We shall there- 
fore consider the principle first with reference to the differ- 
ences between it and the conditions it presupposes on the 
one hand, and the conditions and principles of other kinds 
of variation of utility on the other. 

A suggestion of the principal condition to the diminution 
of utility is contained in the very word "supply." The 
utility — of course the marginal utility, since the uses of 
units well within the margin are ordinarily not affected by 
extension of the supply — of a unit of a good whose supply 
is changing diminishes as the supply increases, and in- 
creases as the supply diminishes. But can we, in conform- 
ity with the sense of this proposition, speak of a supply of 
such a miscellaneous class of commodities as, for example, 
food or clothing? If an inhabitant of a northerly climate 
has a supply of clothing consisting of one coat, what will be 
the diminution of utility accompanying his acquisition of 
another article of clothing, say a pair of trousers? Or 

^ For the position of various economists as regards this point, see the 
footnote on p. 24, below. 



THE LAW OF DIMINISHING UTILITY 21 

suppose he receives successively hat, coat, trousers, and 
shoes, is the principle in operation that of diminishing 
utility? Certainly that principle is somewhat obscured, 
and if so the reason must be because the conditions for its 
operation are not favorable. That is to say, contrary fac- 
tors with their different principles are at work. How these 
different principles work is described in later chapters to 
which the present discussion is a foil. 

The problem suggested by the above illustration may be 
met by sharply defining the term supply. The units of a 
supply must be like one another. They must be so much 
alike as to be interchangeable, sometimes perhaps indis- 
tinguishable. The principle of diminishing utility is oper- 
ative without qualification only in the case of homogeneous 
goods. To avoid ambiguity it might be well to use the 
phrase homogeneous supply when discussing diminishing 
utility. But "a supply" is usually intended to mean just 
that. 

Since by hypothesis the character of the good does not 
change, the reason why the utility of successive units of a 
homogeneous supply of goods diminishes must be sought in 
the nature of man. The reason is the diversity, we might 
say the versatility, of human wants. There is a best use to 
which a particular kind of good may be put and a single 
available unit will be put to that use. Both reason and 
instinct require the application of a good to the satisfaction 
of the strongest desires or elements of desire first. Added 
units will be successively applied to uses for which they are 
less needed or less well adapted. The most important 
class of uses of wood is for the parts of furniture and imple- 
ments. Next, ranks its use for the floors and interior fin- 
ish of houses. In America lumber has until recently been 
so cheap that, except under special conditions, houses have 
usually been constructed entirely of wood above the foun- 
dations. Where wood is the available fuel this use ranks 
next. Buildings to house cattle are of less direct human 



22 WELFARE AS AN ECONOMIC QUANTITY 

interest. Whether crops also are to be completely housed 
when harvested is not of so decisive importance as to make 
barns generally adequate to this use, even where lumber is 
very cheap. The burning of timber merely to make potash 
is no longer a recognized industry. The distillation of wood 
to obtain alcohol is a low grade of use applicable only to 
what are in effect wood residuals. Of course there are 
within each of these uses or classes of uses all gradations 
in the importance of individual uses to which particular 
articles are put. Human ingenuity will continue to find 
uses for a large supply of material or a large number of 
articles of quite the same kind, but uses in which the 
units of the supply are, under static conditions, less and 
less effective. 

Subjectively considered, it might be questioned whether 
two articles are ever put to quite identical uses. The first 
and the second pieces of bread do not satisfy exactly the 
same kind of want; they do not produce exactly the same 
sort of satisfaction in a hungry man. It is hardly possible 
that two meals, though they be objectively identical in 
every particular, be quite the same to the consumer. It is 
only because we discriminate desires by their objects that 
we are likely to think of a particular kind of good as satis- 
fying always the same sort of want. The utility of a sup- 
ply of goods is in its very nature compoimded of many uses. 
Want and demand are always composite, varying, kalei- 
doscopic. 

Owing to the considerable degree of interchangeability of 
goods and to the diversity of their groupings in consump- 
tion, the apphcation of later units of a supply is likely to be 
to uses or desires objectively distinguished as of a different 
kind from those to which earlier units are applied. Some 
com may be used for hominy pudding and for johnnycake. 
Some will feed the chickens and thus supply eggs and 
poultry for the table. Some is reserved for seed. Some 
becomes proprietary breakfast food. Much goes to the 



THE LAW OF DIMINISHING UTILITY 23 

production of pork and much is fermented and distilled to 
become whiskey. Some becomes the starch in our collars 
and some makes glucose and syrup and candy of low grade. 

This diversity of wants and uses, including in increas- 
ing proportion new kinds of uses and future uses, to which 
an increasing supply of goods is appropriated, becomes 
greater as the good becomes more easily obtainable. It is 
owing to this fact that the diminution of utility proceeds at 
a diminishing rate. The curve of utility, or of demand, that 
is, demand for consumption as distinguished from demand 
for exchange, is regularly bent more and more away from 
the vertical. It is concave. This concave character is a 
result of the stimulus which the increase of means imparts 
to the expansion of wants. 

The proposition that the diminution of utility pro- 
ceeds at a diminishing rate is one of those very general 
facts that would be recognized as common sense if it 
could only be stated in unmathematical terms. But exact 
language, and the abstractness of conception that is its 
necessary condition, is repellant. The point is simply that 
the diversification of uses of an increasingly abundant 
supply will ordinarily or regularly be increasingly rapid as 
the supply of an article, and the ease with which it is ob- 
tained, increases. The number of distinguishable uses will 
therefore increase at a greater rate than in proportion to 
the increase in the amount of the supply. If apples at 
$3 a bushel are reserved for a single use (or a single dozen 
uses), but will have two uses at $2, they will not have 
merely three at $1, or four on becoming free goods, but 
certaialy more than in the proportion indicated. Every 
downward step in difficulty of attainment that is of equal 
absolute importance will be increasingly effective in pro- 
moting the development and application of new uses. 
On general grounds, that is, because of the fundamental 
attribute of human nature according to which attention 
and thought run in terms of relative quantities, equal 



24 WELFARE AS AN ECONOMIC QUANTITY 

relative steps are much more likely to be of equal effec- 
tiveness. 

The law of diminishing utility exactly expressed im- 
plies, not mere diminution of utility as supply increases, 
but diminution at a diminishing rate. Some economists ac- 
cept this implication. Others, by their manner of drawing 
the curve or otherwise, show that they have in mind only 
the less definite concept.^ By the law of diminishing utility, 

^ Marshall's statement is: "The one universal rule to which the de- 
mand curve conforms is that it is inclined negatively throughout the whole 
of its length" {Principles of Economics, footnote on p. 160 of the 1st 
edition; p. 99 of the 5th edition). In order to simplify things we may take 
this as referring to the demand curve of an individual, which is in the 
form the same as his utility ciu"ve. If the word supply may sometimes 
be taken in a loose enough sense to include goods bearing in some 
degree a complementary relation to one another, the statement quoted 
claims too much. Cf . chapter ix, below. If it be taken to refer to particu- 
lar utility only, it explicitly avoids being as definite as it might be. But 
Marshall's utility curves are drawn as continuously concave. 

Jevons's practice ( Theory of Political Economy) also conforms to the as- 
sumption of diminution at a diminishing rate. The same, on cursory exami- 
nation, appears to be true of Walras (ElSments d'6conomie politique pure, 
1874). The Austrians do notemploy graphic methods of exposition, hence 
it is not easy to say what course they would ascribe to the variation curve, 
if they were interested in it. The greater number of economists are, for 
the same reason, not specific on this point. 

On the other hand. Professor Patten, as cited on p. 39, below, illus- 
trates the possibilities of an entirely arbitrary[handling of the form of the 
curve. Professor Fetter (Principles of Economics, 1904, p. 24) makes the 
curve convex at its lower portion. There are other cases where the curve 
is allowed to cut the base line, but this is of little importance if its con- 
cavity is maintained. 

A conspicuous but rather ambiguous case is that of Professor John B. 
Clark. His utility curves are in general concave throughout their length. 
But on p. 222 of his Distribution of Wealth, the horizontal summation of 
convex curves is made to yield a concave curve. On p. 225 there is a simi- 
lar convex curve. This may be explained as due to his attempt to deal with 
utilities that are absolutely alike. He says: "Of a series of utilities that 
are exactly alike, the first is measured by a positive quantity and all fol- 
lowing ones by negative quantities" (pp. 231-33). The writer's position, 
as explained in chapter iv, is that the homogeneity postulated for dimin- 
ishing utility is entirely an affair of goods and not of wants, and also that 
time of consumption should not be thought of as restricted to the present. 
But it is of some interest to attempt to trace the diminishing utility of 
a quality, instead of a good. The quality, however, should be objectively 
definable. 



' THE LAW OF DIMINISHING UTILITY 25 

or of normal diminishing utility, — if there is occasion for 
exactness of expression, — the writer always means dimin- 
ishing utility at a diminishing rate. We shall shortly see 
that the conception can be made even more exact and 
mathematical — and at the same time, of course, more 
abstract and restricted as to its practical application. In 
any case the comprehensive conception of the variation of 
utility must provide for other principles of variation and 
for other forms of the curve of variation. 

The apparently convex form of the curve of diminishing 
utility at its lower end, or its more rapid decline and abrupt 
termination, is not contradictory to the principle of decline 
at a diminishing rate. The perishable character of certain 
utilities, together with the limited capacity of correspond- 
ing appetites, produces the phenomena of saturation for 
the consumption of certain goods, for example, ice cream, 
if time is limited. This fact is in part responsible for a too 
broad generalization with regard to the lower end of the 
curve. But the appearance of an abrupt drop may be due 
also to the influence of indirect costs, accompanied, of 
course, by the exhaustion of such possibilities of out-sub- 
stitution — that is, devotion of some units of the supply to 
purposes ordinarily served by entirely different goods — as 
will cover these indirect costs. When price becomes almost 
negligibly small, other elements of cost that are ordinarily 
themselves negligible, such as the cost of going to the place 
of sale, of calculation of utility, of bargaining, of devising 
new uses, of caring for a supply for the future, etc., out- 
weigh the marginal utilities which have become very small, 
and put an end to demand. "Enough is enough." At least 
enough causes inertness. But such an end to the expansion 
of use does not affect the standing of the general principle 
of diminishing utility. Economists who represent the curve 
expressing this sort of variation of utility as normally con- 
vex at any part of its length are thus open to criticism. 
Allowing the curve ever to cut the base line is also ob- 



26 WELFAEE AS AN ECONOMIC QUANTITY 

jectionable, though defensible on grounds of conven- 
ience. 

The effect of neglected costs upon the curve of diminish- 
ing utility is shown in Diagram I. 

It is possible to give a more subjective or psychological 
explanation of the phenomena of diminishing utility. It 
may be said to be a corollary of Weber's and Fechner's law 
of psycho-physical relations, according to which, in order 
that the psychical intensity of a sensation may increase at 
a constant arithmetical rate, the physical intensity of the 
corresponding stimulus must increase at a geometrical 
rate. 

It is to be noted that diminishing utility relates, not to 
the intensity of sensation, but to its extent, or to the exten- 
sion of ideas and of feelings of satisfaction accompanying 
ideas, especially ideas of possession. The supply, moreover, 
whose utility is felt by anticipation, and judged, need not 
be in sight. It need only be contemplated quantitatively, 
as in the case of purchase from a distant store. It is not a 
matter of course that Weber's Law applies to states so 
remote from the intensity of sensation following directly 
upon peripheral stimulation. Nevertheless, the generality 
of the psycho-physical law is so great that the suggestion 
of a connection with diminishing utility is not to be 
scouted. 

It is to be observed that, if we can accept the psycho- 
physical formula, we have thus not merely further support 
for the principle that utility diminishes at a diminishing 
rate, but we know the exact form of the normal curve of 
diminution. 

The graphic representation of the relation between the 
variation of satisfaction or utility and that of the corre- 
sponding physical quantity as expressed by Weber's Law 
requires some use of mathematics. We want a curve show- 
ing the derivative variation of utility supposing supply to 
increase by regular increments. Diagram II is designed to 



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THE LAW OF DIMINISHING UTILITY 29 

show both the form of this curve and a method of con- 
structing it. 

In this diagram AB represents the vertical Hne of refer- 
ence and AX represents the horizontal line of reference or 
base line. The supposition that the increments of physical 
supply are continuous and of equal size is represented by 
drawing the horizontal straight line DE, beginning at the 
vertical line of reference (the origin of the supply), to the 
left and equidistant from the base line; that is, DE is par- 
allel to the base line. The rectangular area subtended by 
any given segment of DE beginning at D represents supply 
at the given stage of its development. The quantity of the 
supply is shown by the horizontal scale, but whatever 
happens to be the economic unit of supply may be repre- 
sented by any definite length on the scale. 

The value assigned to DA, as well as to any unit of the 
supply area, is arbitrary, and any convenient constant may 
be used. We may reduce this constant DA, and thus the 
area upon which it depends, to as small a figure as we will 
without affecting the purpose of the diagram. Also, mere 
units of length along the base line may thus adequately 
represent supply. Indeed, this is the usual method with 
diminishing utility and demand curves. 

We may make any convenient supposition as regards the 
psychical effectiveness or utility of the first increment of 
supply. In order to show the mathematical relations be- 
tween physical and psychical quantities, the latter will be 
plotted with reference to the same lines (AB and AX) as 
the former and its quantity at successive stages of the 
development of the physical supply will likewise be repre- 
sented by an area subtended by a curve whose position has 
a mathematical relation to AB and AX which we are to 
determine. For the first unit of supply we may assume a 
psychical effectiveness corresponding to the area of the 
rectangle AFKJ. We may further assume that the psycho- 
physical relation obtaining here causes a decline of the 



30 WELFARE AS AN ECONOMIC QUANTITY 

psychical effectiveness of the successive units of supply 
such that, in order to produce a second psychical effect or 
amount of utility equal to that corresponding to the first 
unit of supply, the second increment of supply must be 
double the first. Likewise, the third increment of supply 
must be double the second to be equally effective, and so 
on. In other words, in order that the increments of utility 
be constant, the increments of supply must form a geometri- 
cal progression, whose ratio (constant multiplier), in this 
case, is ^ This use of the geometrical series conforms to 
the quantitative relation between any two pairs of suc- 
cessive increments of utility and supply according to the 
psycho-physical law. Therefore, if — 

supply rectangle AFUD corresponds to the utility rectangle AFKJ 
then " " FGVU " " " " " FGLY' 

and " " GHWV " " " " /' GHMR 

and so on. 

Each successive quantity of utihty requires a supply 
increment twice as great as that which produced the pre- 
ceding equal quantity of utility. These utility rectangles 
are shown in the diagram by fine dotted lines. 

It may be well to note here that the areas representing 
supply and utility, respectively, in this diagram have no 
necessary or determinable ratio to each other at any stage 
of their development. The two areas are incommensur- 
able with each other. Only their variations, the successive 
increments of the subtended areas, are susceptible of 
quantitative comparison. 

The problem now before us is to derive and plot a curve 
determined by these utility (dotted) rectangles. This curve 
must pass through the centers of their upper sides. Pi, P^, 
P3, P4, and P5. But the number of the points thus deter- 
mined is too few and their intervals too variable to define 
a curve sufficiently for ordinary graphic purposes. 

The curve passing through these points is what mathe- 
maticians call a rectangular hyperbola. We need not here 



THE LAW OF DIMINISHING UTILITY 



31 



undertake a demonstration of this fact.^ The equation of a 
rectangular hyperbola is xy = c. "What this means is that 
X, which is the distance of any point on the curve from the 

^ To such readers as may be prepared and inclined to go into the 
mathematical proof of the above proposition the following demon- 
stration is offered. For it 
the author of this essay is 
indebted to Mr. L. H. Lu- 
barsky. 

Preliminary Propositions. 
Certain fundamental terms 
of analytics pertaining to 
rectangular coordinates are 
illustrated by the accom- 
panying figure: — 

Let X'OX and Y'OY be 
two straight lines intersect- 
ing at right angles at 0. 

X'OX, the horizontal line, 
is called the axis of abscissae 
or the axis of x. 

Y'OY, the vertical line, is 
called the axis of ordinates 
or the axis of y. 

X'OX and Y'OY are together called the rectangular axes of coordi- 
nates. 

0, the point of intersection of the axes, is called the origin. 
If Pj is any point on the curve, and P^M is drawn perpendicular to 
X'OX, and F^N perpendicular to Y'OY, then 

OM ( = P^N) is called the abscissa or x of point P^. 
ON (= PiM) is called the ordinate or y oi P^. 
OM and ON are together called the coordinates of the point P^ or the 
Xi, 2/i of the point. 

Every point is given by its coordinates x and y. The abscissa of the 
point is written first and is represented by some x with a subscript, and its 
ordinate second, represented by some y with the same subscript. Thus, 
for point Pj (a^j, 2/2), x^ denotes the abscissa of Pj, which is the line Oif, 
and 2/2 denotes the ordinate of Pj, which is the line OL. 

Each curve is a locus of points, that is, a line formed by the continu- 
ous movement of a point. If the curve is a mathematical one the point 
moves according to some given conditions. Since each point is expressed 
by its coordinates x and y, the curve can be expressed in terms of x and y. 
To determine the exact relation of x and y is to derive the equation of 
the locus. Until it is determined, the general equation is represented by 
F (x, y) = 
F{x, y) is resLd function x, y, and it means some expression whose value 
depends on x and y. 




32 WELFARE AS AN ECONOMIC QUANTITY 

vertical axis (the axis of ordinates) and is known as the 
abscissa of the point, multiplied by y, which is the distance 
of the same point from the horizontal axis (the axis of 
abscissse) and is known as the ordinate of the point, gives a 
constant product c. Therefore, when we have determined 
the value of this constant c, we can derive from it as many 

A line, EF, which touches the curve at one point, such as T, is called a 
tangent. 

If the point of tangency is at infinity, the tangent is called an asymptote; 
if X'OX meets the curve at infinity, X'OX is an asymptote. 

Problem and proof. The problem before us may be considered as com- 
posed of two parts: — 

1. To find the relation of the rectangular axes of coordinates to our 
reference lines AX and AB; and 

2. To find the equation of the curve Pj, P^, P3, . . . Qia- (These letters 
refer to Diagram II.) 

In the text it is given that Pj, Pj, P3, P4, and P^ (the mid-points of the 
upper bases of the dotted rectangles) are points on the required curve. It 
is also given that the altitudes of these rectangles KF, LG, MH, NT, 
etc., are each half of the preceding one; hence, if we denote the first alti- 
tude by h, we have t' -' -' - ... as the series formed by the altitudes. 
12 4 8 

But this series is a descending geometric series whose constant ratio is |. 
In such a series the last term approaches zero as its limit. That is, if these 
dotted rectangles are continued, according to the law laid down in the 
text, to infinity, the altitudes of these rectangles will diminish in a geomet- 
ric ratio and approach but never reach zero as their limit. The mid-points 
of the upper bases of these rectangles are points on the required curve, 
and the perpendiculars let fall from these points to the base Une AX are 
equivalent to these altitudes (parallels between parallels are equal). 
Hence these perpendiculars form the same descending geometric series as 
the altitudes, and approach the line AX as a limit. Hence AX is an 
asymptote to the curve and may be considered as the axis of abscissae. 
We thus have one axis of the curve. 

Since we have determined the axis of abscissse and since our axes are 
rectangular and the reference lines AX and AB are also rectangular, 
we may assume any line, as OY, parallel to AB and at a distance d from 
it, as the axis of ordinates, the origin being at 0. 

The rectangular axes of the ciu-ve are OX and OY, the distance OA 
being equal to d. 

Since Pj, P2. P3. P4. etc., are given points on the curve and are the middle 
points of the upper bases of the dotted rectangles (which are plotted to 
scale according to the law explained in the text), the coordinates of these 



THE LAW OF DIMINISHING UTILITY 33 

pairs of values of x and y as we wish and thus determine 
any number of points on the curve. 

The value of x, it should be noted, is not necessarily the 
same as the distance of the given point from the vertical 

points, according to that scale, referred to our axes of coordinates are as 
follows: — 

^1 («!. 2/1) x^ = d+l^ yi = 6i 

P2 (2^2. 2/2) X2 = d + 6 2/2 = 32 

F3 (a^s. 2/3) Xs = d + 15 2/3 = 16 

Pi (a;*, 2/4) X4 = d + 33 2/4 = 8 

Pf, (a^s. 2/5) (Cs = d + 69 2/5 = 4 

The ratios of these successive abscissae and ordinates are: — 
a;i_d + l| yi = ^ = 9 

^^ = !! = 2 
2/3 16 

?/., 16 



a^2 


d + 6 


^2 


d+ 6 


X3 


d + 15 


3^3 


d+15 


a;, 


d + 33 


iC4 


d + 33 


«5 


"d + 69 



Vi 8 

^ = 1 = 2 
2/5 4 

Obviously the ratios of the ordinates are constant. Assuming also that 
any two of the ratios of the abscissae are constant, we can determine the 
value of d. If this derived value of d, when substituted in the other ratios, 
gives the same constant result throughout, both the value of d and the as- 
sumption are correct. Accordingly, — 

d + l| ^ d + Q 

d + 6 d+15 

(d + 6)2 =(d + |)(d+15)' 
d2 + 12d + 36 = d2 + ?|^ + ^ 

— = — 9d = 27 .*. d = 3 

2 2 ■ 

The values of the ratios of abscissae are: — 



a;i _ d + U 
X2 d+6 


3 + U _ 4i 1 
3 + 6 9 ^ 


X2 _ d + 6 
X, d + 15 


3 + 6 _ 9 _ 1 

3 + 15 " 18 "^ 



Similarly the other ratios of the abscissae are |. 

Hence the assumption that tha axis of ordinates is to the left of AB, 



34 WELFARE AS AN ECONOMIC QUANTITY 

line of reference AB. In other words, AB may not be, 
and in fact is not, the axis of ordinates of this hyperbola. 

The value of y, on the other hand, is the distance of the 
given point from the base line AX, for as y becomes smaller 
and smaller the curve approaches (but never reaches) the 
line AX, at which utility approaches zero as its limit. AX 
is therefore an asymptote to the curve (that is, a line which 
touches or is tangent to the curve at infinity), and is the 
axis of abscissae. The axes of any rectangular hyperbola 
must be asymptotes. 

Conformably to this situation we may proceed alge- 
braically with certain equations. If c represents the con- 
stant product whose numerical value we wish to determine, 
and if d represents the distance of AB from the axis of 
ordinates, then x will represent d plus the distance of the 
given point on the curve to the line AB, and y the distance 
of the same point to AX. Then, since Pi, P^, P3, P^, etc., 
are points on the curve, we have the following equations 
of condition based on the dimensions of the dotted rec- 
tangles as plotted to scale in Diagram II : — 

XiXyi = c or ((Z + li) X 64 = c (1) 

X2 X ?/2 = c or ((Z + 6) X 32 = c (2) 

parallel to it, and 3 units therefrom according to the given scale is 
correct. 

Multiplying any ratio of the abscissae by its corresponding ratio of 
ordinates, we have 

•''i _ 1 "'Z _ 1 
— — 2 2 

^ = 2 ^ = 2 

2/2 Vi 

*-i-X ^ = 1X2 = 1 ^X^ = §X2 = 1, 

X2 2/2 ^3 Va 

Clearing of fractions, a; i2/i = x^^ ^iUi = ^zVz 

Similar results can be obtained for any other pair of ratios. 

ButXj^/j = a;22/2 = x^y^ = are the equations of condition of 

the general equation of a curve, xy equals a constant c. Hence the gen- 
eral equation of the locus of the points Pp P2, Ps> Pv etc., is xy = c, 
which is the equation of the rectangular hyperbola. ^ L. H. L. ■ 



THE LAW OF DIMINISHING UTILITY 



35 



(3) 
(4) 
(5) 
(6) 
.(7) 



We will solve equations (l) and (2) for d and c. 

Removing parentheses of (l) 64<d + 96 = c 

" (2) 32rf + 192 = c 

Subtracting (4) from (3) 32d - 96 =0 

Transposing 3'2d = 96 

Dividing by 32 .'.d = S 

Substituting this value of rf in (3), we have 

64 X 3 + 96 = c 
192 + 96 = c 

:.c = 288 

Having determined the value of c, we can now replace 
the general equation of the rectangular hyperbola, xy = c, 
by the particular equation, xy = 288. 

Identical solutions may be obtained from any other two 
points on the curve. Therefore, for the points Pi, P2, and Pa, 
we have 

Pi, when a; = 4|, ?/ = 64 
P2, " ic = 9, 2/ = 32 
Pa, " x = 18, y = IQ 

The product xy = 288 in all cases. 

Having obtained the result xy = 288, we may easily 
determine the value of y for any number of successive 
physical units of supply represented by five subdivisions of 
the horizontal scale. The successive values of x on this 
supposition are shown in the middle column below. The 
corresponding values of y to satisfy the equation xy = 288 
are obtained by simple division {xy -r- x = y) and are 
shown in the last column : — 



xy 



y 



xy 



y 



288- 


- 5.5 = 52A 


288- 


- 50.5 = 


5.7 


288- 


- 10.5 = 27.4 


288- 


- 55.5 = 


5.2 


288- 


- 15.5 = 18.6 


288- 


- 60.5 = 


4.8 


288- 


- 20.5 = 14.0 


; 288- 


- 65.5 = 


4.4 


288- 


- 25.5 = 11.3 


288- 


- 70.5 = 


4.1 


288- 


- 30.5 = 9.4 


288- 


- 75.5 = 


3.8 


288- 


- 35.5 =9.1 


288- 


- 80.5 = 


3.6 


288- 


- 40.5 = 7.1 


288- 


- 85.5 = 


3.4 


288- 


- 45.5 = 6.3 


, and . 


30 on 





36 WELFARE AS AN ECONOMIC QUANTITY 

These computations furnish the data for the successive 
rectangles of equal width drawn on the diagram in fine 
continuous lines. The determining points are indicated by 
Qiy Q^y Qif • . . • Qis- These points and rectangles show the 
psycho-physical relation where the increments of supply 
are constant, utility varying accordingly, just as the 
dotted rectangles show the same relation where the incre- 
ments of utility are constant and the increments of supply 
conform to that requirement. The locus of all the points is 
the curve shown. 

It is of interest to note that the curve necessarily bisects 
the dotted lines showing the differences between the alti- 
tudes of the successive dotted rectangles.^ The further 
points thus determined are marked Zi, Z2, Z3, etc. 

1 The values of x and y for the points Pi, Pj, P3, etc. have been pre- 
viously determined. 
For Pi, y = 64, .*. FK = 64 

" P2, 2/ = 32 .-. FY' = 32 

Subtracting FK - FY' = 32 

But FK-FY'= Y'K 

.: Y'K = 32 

^Y'K= 16 1 

Similarly hRL =8 II 

|SM= 4, Ill 

If F, G, H, T, etc., are the extremities of abscissae of points on the curve, 
the values of these abscissae are found from the scale to be 6, 12, 24, 48, 
etc. Knowing the equation of the curve to be xy = 288, we can replace 
the X by its particular value and calculate the corresponding y's, which are 
equivalent to FZ^, GZ^, UZ^, TZ^, etc. 

When a; is 6, 2/ is 48 (= PZi) 
" " " 12, " " 24 (= GZ2) 
" " " 24, " " 12 (= HZ3) 

Since FZ^ = 48 GZ^ = 24 HZ3'= 12 

and FY' =32 GR = 16 ES = 8 

Subtracting Y'Zi = 16 (I') RZ^ = 8(11') SZ^ = 4 (IIF) 

Hence comparing I', II', and III' with I, II and III, we have 

^Y'K = Y'Z, IRL = RZ^ \SM = SZ3 

In other words, the curve bisects the dotted lines showing the differences 
between the altitude of the successive dotted rectangles. Hence we may 
consider the points Z^, Zj, Z3 . . . as also determined by the construc- 
tion of the diagram. L. H. L. 



THE LAW OF DIMINISHING UTILITY 37 

We may obtain a continuous curv? for the normal dimin- 
ution of utility either by drawing in free-hand the connec- 
tion between the needful number of points obtained as 
above, or we may plot a rectangular hyperbola as de- 
termined by any four of these points according to any 
accepted mathematical method. The curve is shown in 
Diagram II as a heavy continuous hne passing through 
the points determined by the successive rectangles. 

There is no reason for assuming that the initial unit of a 
supply will have the highest utihty possible according to 
the curvature revealed by the decline in the utility of the 
successive units. Mathematically, this supposition would 
always give the initial unit an infinite utility. This does 
not, according to the psycho-physical law, fit the facts. 
In economics the generally accepted idea is that the initial 
unit of a supply has indefinitely large, or infinite, utility 
only in the case of necessaries. In other words, the axis of 
ordinates is usually at the left of the initial portion of the 
utility area. If the distance from AB to the axis of ordi- 
nates is greater than in Diagram II, the curve is corre- 
spondingly flatter. 

In a so-called "constant-outlay" curve,^ that is, one in 
which the unit price of a supply so varies as supply in- 
creases or decreases that the aggregate price or value re- 
mains constant, the vertical line of reference must coincide 
with the axis of ordinates. This curve also is of course a 
rectangular hyperbola. According to the mathematical 
and other implications of the above discussion, since the 
axis of ordinates is usually at the left of the initial point 
for the supply, the total outlay will normally become some- 
what greater as supply increases and price declines. 

The form of the normal or regular diminishing-utility 
curves of Diagrams I, III, and IV is the same as that devel- 
oped in detail in Diagram II. The initial utihty in these 
hypothetical curves, however, is an arbitrary matter and is 
1 Cf . Marshall, Principles of Economics, 5th ed., p. 839. 



38 WELFARE AS AN ECONOMIC QUANTITY 

adjusted according to the available space. The slope of the 
curve may thus be made to vary at will. 

The foregoing discussion of the mathematical form of the 
normal curve may seem to be mere mathematics rather 
than economics. The conception of the normal law is 
admittedly, and appropriately, highly abstract. Abstractly 
considered — whether the conditions are ever realized in 
practice or not, especially as regards the continuity of the 
variation — the curve of diminishing utility must be a true 
mathematical curve, that is, continuously changing its 
direction according to definite mathematical law. Experi- 
ence shows this law to be, as roughly expressed, diminution 
at a diminishing rate. It is accordingly in harmony with 
the facts of experience that the normal curve never cuts 
the axis of abscissae (or, what amounts to the same thing, 
cuts it at infinity), but comes nearer and nearer to it by 
relatively equal stages. A rectangular hyperbola meets 
these requirements better than any other curve. 

That the normal curve belongs in the realm of abstrac- 
tion does not impair its explanatory quality and should not 
prevent our giving it its due place, even though that be a 
small one, in graphic representation and practical discus- 
sion. We must recognize that "diminishing utility" is only 
one of several types of the variation of utility, though 
doubtless the most fundamental one. The variation of the 
utility resulting from the building up of a complementary 
group would obviously require an entirely different for- 
mula. But even short of this effect, the conditions required 
by the normal law fail in any case where there is not a 
homogeneous supply over against variety of possible uses. 
The units of commodity must also be small and the units of 
use numerous. Especially for the individual consumer 
these conditions are seldom more than imperfectly real- 
ized.^ Hence the normal law belongs among those highly 

* For the normal law in relation to an aggregate or social diminishing- 
utility curve, see p. 50 jf. below. 



THE LAW OF DIMINISHING UTILITY 39 

abstract explanatory principles that are never self-suflS- 
cient, but are chiefly useful as points of departure in dealing 
with concrete cases. But in this particular it has the highly 
respectable company of the law of gravitation. 

No great practical importance need be attributed to the 
exact mathematical form of the curve of diminishing utility 
as determined according to the psycho-physical law. We 
may call this the regular or normal curve. It is implied in 
what has already been said that the actual variation of 
utility obtained in a concrete case (supposing it could be 
exactly measured) would doubtless differ greatly from this 
norm. At best the normal curve would represent only the 
mean of many such practical or realized curves. But to 
draw the curve in a way strikingly different from the 
psycho-physical norm, for no assignable reason, is scarcely 
defensible. For example, the curve is not a straight line.^ 
To draw it so is contrary to the essential nature of the law 
of diminishing utihty, strictly so called, according to 
which, as a homogeneous supply increases, marginal utility 
diminishes at a diminishing rate. Quantitative conceptions 
that are merely probable or on the average true are service- 
able as correctives of imaginative vagaries even where such 
conceptions are in no sense of the nature of exact science. 
Our quantitative ideas should be made as definite as pos- 
sible even if they also thereby become hypothetical. In 
fact the succeeding chapters of this book are mainly de- 
voted to showing the limitations upon the scope of the 
diminishing-utility concept. 

^ On p. 100 of Professor Patten's Theory of Dynamic Economics, di- 
minishing-utility curves for two articles — or demand curves, but the 
next page shows that no distinction is made between these two — are 
presented, one of which is convex, the other concave. On p. 91 a utiHty 
curve is drawn as a straight line. The same economist uses straight lines 
in his Theory of Prosperity on pp. 17 and 28, and convex curves on 
pp. 24 and 33. 



CHAPTER IV 

THE SCOPE AND LIMITATIONS OF DIMINISHING 
UTILITY 

Practically the course of the curve of diminishing utility 
may differ markedly from the regular form above described. 
Even as regards the technically psychological bearing of the 
principle there are qualifications to be taken into considera- 
tion. Especially important is the limitation due to the 
psychological principles of adaptation and accommodation. 
Because of this principle of accommodation, initial en- 
joyment is not always maximum. It takes time, so to speak, 
for the organism to get under way. One orange may stimu- 
late the appetite for a second so that it gives greater satis- 
faction than the first. To the drunkard the first glass of 
whiskey makes the desire for a second stronger than was 
the original desire, tlie second glass does the same for a 
third, and so on. In this case the situation on the side of 
demand clearly changes at each step, one man plus one 
whiskey constituting a different consumer from one man. 
Something analogous holds for the oranges. In fact, in 
order to keep the consumer a constant quantity, it is neces- 
sary to take his reasonable estimation of the successive 
units, not their immediate effectiveness for satisfaction. 
Whether the mind is alert and expectant, whether the at- 
tention is focused upon the supply to be enjoyed, whether 
the sense-organs concerned are well rested and fresh, all of 
these conditioning factors are rendered inoperative, even 
as disturbing factors, if the variation of utility is viewed 
contemplatively and calculatingly, as is appropriate for 
economic judgments. This being the fact, — though the 
amount of formal calculation entering into the process will 
not bear much emphasis, since, in the view of the writer, 
judgments of value are by nature intuitive, — if only one 



THE SCOPE OF DIMINISHING UTILITY 41 

unit of supply, one orange a year, for example, is to be had, 
it should be regarded as a rarity to be coddled and not to be 
consumed when hunger is greatest. Moreover, a reasonable 
estimation of the utility of whiskey will take account of 
future effects, not merely of the immediate pleasure. The 
fact that initial enjoyment is not always maximum, there- 
fore, does not in any respect invalidate the law of regular 
diminution of utility. 

The effect of the principle of diminishing utility is not to 
be confounded at the bottom of the curve with that of sati- 
ation or exhaustion of capacity to enjoy. The latter, like 
accommodation, produces, in effect, a different consumer. 
The psychology of satiation, moreover, is quite different 
from that of diminishing utility. The allowing of time to 
recover appetite is not contrary to the principle, but rather, 
for the purposes of economics, to be taken for granted. So 
also is the allowing of opportunity for diverse uses. Pearls 
might be so abundant relatively to the needs of a particular 
consumer as to make their use for flavoring a drink by dis- 
solving them in vinegar an experiment worth trying. The 
utility proper so obtainable, it is true, is of little significance 
compared with the adventitious utility, but, with regard 
merely to the impetus which the diminution of utility gives 
to variety of use, conditions might be such as to make the 
act reasonable. 

The principle of diminishing utility is, in its practical 
effect, much limited by the substitution of a somewhat 
different good, more easily obtainable, for the good better 
fitted for the particular purpose but harder to get. In the 
course of the last century, cotton clothing, because of its 
cheapness, has displaced woolen very largely, regardless of 
the inferiority of the former for many purposes. This is 
but the practice before mentioned of putting the added 
units of a large supply to new uses, to which the good whose 
use is thus extended is of course less well adapted. The 
one process, or rather that process from the one point of 
view, may be called in-substitution, and the converse out- 



42 WELFARE AS AN ECONOMIC QUANTITY 

substitution. The effect of each is to flatten the curve of 
diminishing utiHty, or rather of comparative valuation and 
effective demand, at different parts of its extent. 

But here we.are passing beyond our bounds and trespass- 
ing on the realm of market valuation. In so doing we are 
likely to encoimter difl&culties in relation to the definition 
of supply — for example, as to whether different grades of 
a commodity constitute different supplies — which are not 
of importance for the consideration of the variation of 
utility as such, with reference to which uses are ranked 
without regard to a margin or to an exchange or substitu- 
tion point. 

The absence of objective differences between units is not 
the one necessary condition to their constituting one supply, 
but only the strongest case. The inclusiveness of a supply 
must depend upon economic, not upon physical, criteria. 
The homogeneity of a supply is, for certain purposes, an 
aspect of goods rather than a hard-and-fast fact. If inter- 
changeability of units is the test, — and that seems strict 
enough, — since food, clothing, and shelter are in higher 
latitudes to some degree interchangeable, they must on 
occasion constitute one supply. The principle of diminish- 
ing utility is applicable, though only qualifiedly applicable, 
to a supply whose homogeneity is anything but a physical 
fact. 

The principle of diminishing utility should apply for any 
and all goods in so far as they can be brought together 
under a homogeneous conception. But all goods are, 
through economic development, for certain purposes 
homogeneous. In terms of exchange value or indirect 
utility, all goods are commensurable; they can be reduced 
to a common denominator. Hence the increase of goods in 
general can, from this point of view, be brought under the 
principle of diminishing utility. Because he already has so 
much the rich man would take Uttle or no pleasure in a new 
possession that might bring supreme joy to the poor man. 
Increase of riches, if conceived homogeneously, for ex- 



THE SCOPE OF DIMINISHING UTILITY 43 

ample, In terms of money, means diminution of the utility 
of each successive unit for their possessor. Each thousand 
dollars added to a man's possessions means less, subjec- 
tively, as his "money" increases. A nation that is twice as 
rich as it used to be or as is another nation has not ipso 
facto twice as much well-being. The fact that money is 
indirectly the most versatile of goods, that is, the best 
adapted to serve all purposes, makes it in the abstract thor- 
oughly homogeneous. Even If this broader sort of homo- 
geneity is also thinner, or has but a conditional applicabil- 
ity, it is nevertheless highly significant. Content has been 
sacrificed for the sake of extent; but for some purposes the 
latter may be the more important. 

The utiHty of additions to a private library, considering 
a book as merely a book, very clearly follows the principle 
of diminishing utility. From this viewpoint, it is to be 
measured in the abstract and by the ratio of what is ac- 
quired to what is already possessed, i.e., measured rela- 
tively rather than concretely and absolutely. The utility 
of such an increment may be considered merely posses- 
sively and existentlally. If the books are not easily thought 
of under an aspect of homogeneity and as a single supply, 
the rich man's "money" or property certainly can be so 
viewed. 

Property is coming more and more to be abstract or 
paper property, and this much at least is not merely cap- 
able of being viewed under an aspect of homogeneity; it is 
homogeneous, for it is adequately measured and described 
in dollars. Such property, both principal and income, is 
mere purchasing power. It Is thus conformable to all the 
requirements for direct application of the principle of di- 
minishing utility. 

When the man of large means manages to have his ex- 
penditures keep pace approximately with his income in 
ways to yield legitimate utility, his great recourse is to 
complementary utility.^ But he is usually too passive and 
1 Cf. chap. IX, especially p. 113. 



44 WELFARE AS AN ECONOMIC QUANTITY 

imitative in his choices to make the most of the comple- 
mentary relation. Hence, though his increasing means 
theoretically still continue to possess utility for him, there 
ceases to be any proportion between means employed and 
ends obtained. Without the assistance of certain invidious 
and anti-social forms of enjoyment, the exploitation of 
socially unrequited personal services, and the bidding-up 
of the rare, including rare sites and unusual forms of skill, 
it would be difficult or practically impossible to continue or 
to maintain an additional utility for added increments of 
riches and income, notwithstanding the fact that there is 
theoretically always some possible resort. On a generaliz- 
able level, supposing expenditures limited with regard to a 
reasonable return for outlay and also with regard to the 
amoimt of time required for reasonable spending, it may be 
said that there is no power economically to use indefinitely 
larger and larger amounts of wealth for private and per- 
sonal ends. 

There is no escape from the conception of homogeneity 
that underlies this idea of the diminishing utility of the 
dollar through assuming that a supply satisfies always but 
one and the same want. We have seen what a variety of 
uses are included under such a single want. Moreover, if 
we look further, we shall see that the unity of the want is 
itself but a reflection of the unity of some kind of good. 
One want is linguistically rather than psychically distinct 
from other wants. If we really get on psychological groimd, 
we find that all wants are subjectively unitary as phases of 
one comprehensive desire for the means of satisfaction or 
happiness.^ But the environment requires the specializa- 

^ TSote on the commensurability of all sorts of satisfaction. All utilities 
are commensurable with each other because all satisfactions are thus 
commensurable. But it makes no particular difference whether we rea- 
son from the subjective to the objective term, or vice versa. All wants are, 
therefore, in the last analysis, that is, as central feeling or affection, 
subjectively unitary or of one kind. They are commensurable one with 
another and can, on occasion, be given a definite rank and order of pref- 
erence. That some of the positions in this scale may be separated by wide 



THE SCOPE OF DIMINISHING UTILITY 45 

tion of desire and also particular thought and action with 
reference to a succession of concrete things "wanted." 

and permanent gaps, with no stepping-stones between, does not affect 
the essence of the situation, but does explain the reluctance of some to 
admit the commensurability of all feelings. That we can assign no exact 
value in terms of measurement units to the distances between various 
points on the scale is also in principle unessential. 

A question may arise also as to the identification of satisfaction with 
the pleasant side of central feeling or affection. It is true the word "satis- 
faction" is used both as referring to a mental process and as signifying 
something more objective and various, that is, the meaningfulness, 
especially the enduring meaningfulness, to the subject, of an event or 
experience. But in economics the term satisfaction refers to the stage of 
consciousness where wants or the subjective aspects of wants are com- 
mensurable with each other. In this sense satisfaction is here identified 
with the psychologist's pleasantness. 

It is not a fundamental objection that some of our wants and choices 
are impulsive or sensory-motor rather than the outcome of reflective 
judgment, and therefore do not refer back directly to pleasantness-un- 
pleasantness. Desire is often of this nature. The desirableness of some 
things economic may to some extent be determined in this way rather 
than by the satisfactions obtainable. But such desires are either organ- 
ized into the reflective life of the individual, or else the one controlled by 
them, instead of by desires for such things as are valued upon taking 
thought, is unreasonable and uneconomic, and therefore his actions do 
not conform to the necessary assumptions of abstract economic theory. 
Hence, though it is true that the economic reactions of many individuals 
are not only not rational in form, but are also not reflective in method, and 
are consequently no more motived by anticipated satisfactions than by 
the desirableness of the objects sought, the position taken in the text is 
correct, psychologically as well as economically. Even for the most rea- 
sonable and "economic" of beings, many choices will, whether by habit 
or instinct, be nearly or quite reflex. Economic theory may deal with all 
acts and conduct as if resulting from states of clear consciousness because 
the reasonable habitual or only half-conscious responses to stimuli have 
been evolved from such as were formerly clearly conscious, and because 
functionally, that is for economics, the two are not essentially different. 

Valuation, it is true, is a reflective process, whether the reference be to 
marginal valuation or to the more general valuation of uses. Most eco- 
nomic acts are therefore not the direct outcome of valuation, though 
economic conduct as a whole is so motived. Valuation is a piecemeal 
and patchwork affair. 

It is only in the fully conscious and reflective process of valuation that 
comparison and commensuration of possible sources of satisfaction take 
a prominent part. But it is, of course, not the feelings themselves that are 
directly compared. The various represented objects and situations are 
tested by feeling, and so quantitatively judged. We do not weigh the 
feelings themselves, but with the anticipated feelings we weigh the things 



46 WELFARE AS AN ECONOMIC QUANTITY 

Hence names are evolved for various wants. But tlie dis- 
tinctions are objective or linguistic, rather than psychologi- 
cal or economic. 

represented to the mind. Not calculatingly, but by inspection and in- 
tuition, we feel the greater value of this or that object or situation. 

The writer is aware of the fact that there are psychologists who reject 
the proposition that the affective phase of mental processes, that is, feel- 
ings like pleasantness and unpleasantness, is merely dual (plus and minus) 
in quality and commensurable throughout its extent, though commensur- 
able with less facility where the question is one of determining the pleas- 
antness equivalent of a definitely and decidedly unpleasant experience. 
The older pleasure-pain theory was very crude. Some place for desires 
that are almost mere motor tendencies, which offer chiefly possibilities of 
unpleasant feeling as a result of obstruction or inhibition, must be made. 
This point has already been disposed of. For the rest, where the psycholo- 
gists disagree, one is permitted to make his own choice between them. 
The anti-hedonists have no such exclusive possession of the field as the 
noise they make may suggest. The contributions of the so-called English 
schools to both psychological and economic thought are still vital, though 
not fashionable, and they are of course subject to modification and re- 
statement. But the economist need insist only that all the qualities that 
make goods desirable are, in the last analysis, commensurable with each 
other on the subjective plane. With psychological terminology he is little 
concerned. 

Some anti-hedonism — for present purposes it might better be called 
anti-commensurationism — is, moreover, discredited at its inception, 
since it is the product, not so much of scientific study as of an ethical 
viewpoint that wants to believe some of our desires to be absolutely 
different qualitatively from others and absolutely incommensurable. 
That such conscious or unconscious "pragmatism" does violence to fun- 
damental canons of scientific thinking, it is doubtless useless to point 
out. It is perhaps even less useful to argue the point. 

This note may perhaps seem rather dogmatic in tone. Lack of space 
for fuller treatment is the excuse. The note is intended rather to express 
an opinion than to demonstrate a truth. In this spirit, also, it may be 
well to add that the writer is unable to attach any ethical significance 
to psychological "hedonism," without regard to whether it be thorough- 
going or qualified. He feels that ethics is concerned principally with the 
problem of the right relation between the good of the first person (x) 
and that of others (xi, X2, X3, etc.), and only secondarily or derivatively — 
through the requirement that each a; be of a nature to fit into the system 
of x'a — with the meaning of x, the good of the individual, itself. On ethi- 
cal subjects he finds himself most in agreement with Henry Sedgwick, 
Methods of Ethics. 

As regards the psychological implications of the above statement, 
reference may be made to Titchener, Elementary Psychology of Feeling and 
Attention, 1908, where the controverted points concerning affection are 
dealt with and disposed of in order on a purely psychological plane and 



THE SCOPE OF DIMINISHING UTILITY 47 

If, to a considerable extent, different kinds of goods can 
be interchanged and combined in a single supply, it is 
equally true, on the other hand, that we need to analyze 
and separate the different elements of utility in a single 
good or a single supply. In a single concrete good there 
may often be distinguished several quite different utilities, 
that is to say, power to satisfy distinct desires that might 
find satisfaction in separate goods. A watch may give 
satisfaction because of its reliability as a time-keeper, 
because of the beautiful material and decoration of the 
case, because it is an evidence of the wealth and social 
standing of its possessor, and because it is a reserve that 
can be quickly realized upon in case of urgent necessity. 
The utihty of the watch has a collective reference to the 
benefit receivable from all these uses. 

The diminishing utility of a supply of watches will be due 
to the applicability of the law to the different elements of 
utility brought together in each watch. ^ Since the initial 
utihty and the rates of diminution are different for the 
different elements, and since the ratio of the significance 
of each element to that of the others differs for different 
tastes and means, a difference in ability to pay will express 
itself by a sacrifice of more of the decorative utility than of 
the time-keeping utility. Conversely, greater means find 
expression in the demand, not merely for more articles, but 
especially for new qualities and new utilities in the articles 
bought, even when they remain commercially of the same 
kind. Diminishing utility is inevitably obscured under 
such circumstances, where the purchaser chooses articles 
with reference to adding new utilities to them, instead of 
increasing his supply of the goods. It might be said that 
the kind of utility last added — for there may be no in- 

where a conclusion is arrived at that is quite in accord with the views 
here expressed, but of course without ulterior economic, or other func- 
tional, reference. See also O. Kiilpe, article Oefiihl, Handworterbuch der 
Naturwissensehaften, vol. iv (1913), p. 678. 

^ For a parallel discussion of this subject from a different point of view, 
of. Clark, Distribution of Wealth, pp. 235-45. 



48 WELFARE AS AN ECONOMIC QUANTITY 

crease in the number of goods — is the marginal utility. 
But are the others then the super-marginal stages of the 
diminution of utility? 

The use of the watch as an illustration is not favorable 
to simplicity of explanation, since the time-keeping and 
other utilities embodied are sold in such large "chunks" 
that it appears as if there is for each particular quality only 
one point or level of utility, varying with the tastes and 
circumstances of the individual, instead of a curve. But 
the discontinuous succession of the units of a supply only 
obscures the principle of diminishing utility without affect- 
ing its validity as an abstract explanatory principle. 

The difficulty with discontinuity is occasioned by the 
fact that subjective economics is imder the necessity of 
taking, for the most part, the point of view of the individ- 
ual. The combination of such utilities into a social curve of 
diminishing utility — whose relation to tlie demand curve 
will be noticed presently — does not alter the principle 
involved, while it does make a curve of the points.^ The 
regular diminution of utility as a social phenomenon is 
what is of most significance for economics. It is rarely that 
a single point is given, furthermore, even for the individual, 
at least if he is the economic representative of a complete 
private economy, that is, a family. The head of a family 
needs to buy or own several imits of time-keeping utility, 
or even several watches. Even mere duplication may be a 
convenience. Though a person can use but one umbrella at 
a time, it is decidedly convenient to possess more than one. 

The relation of diminishing utility to demand is largely a 
matter of the summation of utility curves. The transition 
from the normal diminishing utility curve for an individual 
to social demand curves is thus in part a mathematical 
problem. If the normal law holds for summated curves, it 
acquires correspondingly better standing practically.^ 

^ Cf. Jevons, Theory of Political Economy, 2d ed., pp. 96-98. 

2 The rectangular hyperbola appears to be of great significance also in 
relation to the interpretation of other economic phenomena, notably those 
of the status of the distribution of wealth. 



THE SCOPE OF DIMINISHING UTILITYj 49 

But first, it may be asked, how is the transition from a 
diminishing utiUty to a demand curve effected in the case 
of an individual? The diminishing utility curve measures 
want, which, in order to be effective as demand, must be 
supported by purchasing power. But this is simply a mat- 
ter of determining what is the utility equivalent of a mar- 
ginal dollar. This quantity of utihty will be constant for 
any comparisons and judgments the individual wishes to 
make. Hence the individual's demand curve is simply his 
utility curve with its vertical scale translated into terms of 
dollars. A certain length of ordinate represents, not merely 
a certain quantity of utility, but also a stated monetary 
equivalent. Of course as a demand curve it will be raised 
or lowered by a change in the circumstances, or the pur- 
chasing power, of the individual. But that does not affect 
the mathematical character of the curve in the least, but 
merely changes its scale. 

Some one may question whether the upper reaches of the 
curve, the higher utilities, should be translated into money 
in quite the same way as those near the margin, since, 
it may be alleged, these uses will not be valued in money 
till they become marginal, and then money will be scarce. 
But the equation of utility and money supposes the indi- 
vidual's purchasing power unchanged. However difficult 
to apply, and of however little commercial interest the 
result may be, these high and largely super-marginal utili- 
ties must be measured by the same standard, both as to 
utility and money, as the marginal ones, in order that the 
curve be correctly conceived. In fact, however, we should 
not suppose that the individual's purchasing power is being 
reduced by subtraction from a non-replenished stock of 
money by reason of whatever he buys or consumes. He has 
income as well as expense, so his supply of money will not 
be depleted by economically well-considered expenses, nor 
the form of his demand curve affected. His utility and de- 
mand curves will themselves take account of the fact that 
he is spending from income, and also providing by his 



50 WELFAKE AS AN ECONOMIC QUANTITY 



expenditures partly for future uses. If his circumstances 
change, for example, by the loss or the inheritance of a for- 
tune, of course the scale of his demand curve will change, 
but that is a matter already disposed of. 

The application of the normal law to the social diminu- 
tion of demand is not so simple a matter. It is a necessary 
postulate that several normal curves summated be a simi- 
lar normal curve, that is, a rectangular hyperbola. But it is 
a demonstrable proposition that a curve constituted by the 
vertical superposition of an indefinite number of rectangular 
hyperbolae, in such a way that all the axes of ordinates co- 
incide, and that the area subtended by the resultant curve 
(i.e., between it and the axis of abscissae) and lying between 
any two ordinates is the sum of the areas between the 
corresponding ordinates of the constituent curves, is itseK 
a rectangular hyperbola.' 

^ Given: Pj and Pj any two points on a rectangular hyperbola xy = c; 
Qi and Q2 any two points on another rectangular hyperbola xy = k (re- 
Y ferred to same axes of coor- 

dinates); Mj, a point whose 
abscissa is the same as that 
of Pi or Qi and whose ordi- 
nate is equal to the algebraic 
sum of the ordinates of Pj 
and Qi, that is 

2/1 = 2/1 + 2/1 ; 

and M2, a point similar to M^. 

To 'prove that the coordi- 
nates of Ml and Mj satisfy 
the equation of a rectangular 
hyperbola. 

Proof: The equations of 
condition for the points Py 
P2, Qi, and Q2 are 

X22/2 = c 




Since 



X22/2 = c 



Xy = Xi = Xy" and X2 = x^ = x^ 

k 
Xi2/i' = k .'. 2/1' =- x^Vz' = k 
*i 



c 

2/2 = - 

*2 



"'■'z 



THE SCOPE OF DIMINISHING UTILITY 51 

It is, of course, the area subtended by the curve that re- 
presents the quantity of utihty or of demand. The method 
and results of summating these areas constitute the sub- 
ject under consideration. In the case just mentioned they 
are added by way of the ordinates. Such addition of util- 
ity or demand curves raises a question as to what then 
happens to the significance of a unit of the horizontal 
and vertical scales, respectively. 

Price is measured along the vertical axis. This scale 
remains the same for the summated as for the component 
curve. But if we should add a number of curves, the level 
of the resultant curve might be raised to an inconvenient 
height, hence it may be well to reduce the scale or plot the 
resultant curve on a smaller scale than the component 
curves, perhaps by dividing the summated scale by the num- 
ber of component curves. This will give the resultant curve 
a mean position among the curves summated. If we wish to 
regard the former as a mean of the latter, we can con- 
veniently consider it as drawn to the same scale. Mathe- 
matically the summated curve as above discussed and the 
mean curve are in effect the same. They have the same 
equation, for each of the ordinates of the mean curve is 
some aliquot part of the corresponding ordinate of the 
summated curve. 

Next to be considered is the question as to what happens 
to the horizontal scale, along which are represented the 

By hypothesis 2//' = 2/1 + 2// 2/2" = 2/2 + 2/2' 

••• 2/1" = ^1 + 2/1' 2/2" = 2/2 + 2/2' i 

Clearing of fractions ,; 

a;i2/i" = c + k X22/2" = c + k 

Since the products of the coordinates of the points M^ and M 2 are con- 
stant and equal to c -\- k, it follows that M^ and M2 are two points on a 
rectangular hyperbola whose equation is 

xy = c -\- k 

L. H. L. 



52 WELFARE AS AN ECONOMIC QUANTITY 

units of potential supply. The measuring of a unit of this 
scale is changed by direct summation, so that a imit that 
before represented but one unit of commodity now repre- 
sents as many as there are curves added together. But of 
course if we use the mean instead of the sum of the ordi- 
nates, the horizontal scale retains the same significance for 
the resultant curve as for its constituents. 

It is possible to deal with the units of the horizontal 
scale in a different way if at the same time we change the 
meaning of a unit of the vertical scale. We may add the 
demand areas by way of the abscissae instead of the ordi- 
nates. That the resultant curve will be a rectangular 
hyperbola is obvious if we note the fact that this species 
of curve is symmetrical with reference to both its axes, that 
is, X and y are interchangeable in the equation {xy = c) 
of a rectangular hyperbola. In unmathematical terms, the 
arm lying near to the axis of ordinates has the same relation 
to this axis that the other arm has to the axis of abscissae. 
Hence what holds of the summation of ordinates and of 
areas subtended between the curve and the axis of ab- 
scissae holds also of the summation of abscissae and of the 
similarly subtended areas. What is proved of the rectangu- 
lar hyperbola in relation to one axis is proved in relation 
to the other. 

The next question is what is the meaning in terms of 
economics of this addition of abscissae. The significance of 
a unit of both the vertical and the horizontal scales, in terms 
of price and of potential supply, respectively, remains the 
same. The area of the resultant curve is of course extended 
in proportion to the number and extent of curves summated. 
The demand at ordinary prices is of course much prolonged. 
But, if desired, a mean curve can be used in this case as it 
is above where summation is effected by way of the ordi- 
nates. In any case the form of the curve remains the same. 
But it may be desirable to make some allowance for the 
fact that the upward-extending arm may not be more than 



THE SCOPE OF DIMINISHING UTILITY 53 

partially represented in the demand schedules of some con- 
sumers. 

The fact referred to, namely, that the initial point of the 
supply does not necessarily coincide with the axis of ordi- 
nates, makes a qualification necessary. The extension of 
demand brings in new users whose initial demand-price 
may be so low that they are ordinarily not purchasers at 
all. This would mean in practice some distortion by way 
of a flattening of the lower portion of the curve. 

On the other hand, the demand curve, unlike the utility 
curve, takes account of the price that the consumer is will- 
ing to pay. Ordinarily, this is substantially only money. 
But if the price is low enough, other costs come into con- 
sideration. These have been discussed in the preceding 
chapter under the name of "neglected costs." They tend 
to cause the lower end of the demand curve, as expressing 
wilHngness to purchase, to drop rather sharply and then 
abruptly terminate. 

Another possibility remains to be considered. The above 
discussion assumes that the axes of ordinates coincide with 
one another as well as the axes of abscissae. Of course the 
axes of abscissae will coincide, since the zero-price line has 
the same limiting relation to all demand curves. 

But suppose the axes of ordinates of several curves do 
not coincide? This would mean that at about ordinary 
prices the rate of diminution of demand would be compara- 
tively rapid in one curve and comparatively slow in an- 
other, the one arc being nearer the axis of ordinates than 
the other. But this situation does not prevent summating 
the curves with reference to either of their axes or any other 
chosen axis. The abscissae of each curve bear such a rela- 
tion to one another as to constitute a rectangular hyper- 
bola. Add the two sets, and the result is a rectangular 
hyperbola. For the rest we need only to know how the 
significance of the units of the scales is affected. The fact 
that some of the upper reaches of some of the curves may 



54 WELFARE AS AN ECONOMIC QUANTITY 

be only hypothetical merely distorts that portion of the 
realized demand curve, but not in a way to affect its fun- 
damental characteristics. 

For the benefit of the reader who is little inclined to 
trust himseK to mathematical reasoning, or who may feel 
that we have narrowed our premises too much to arrive at 
a conclusion of practical value, it should be said that the 
demonstration that the individual utility curve is a rect- 
angular hyperbola was developed without thought of any 
ulterior relation to the problem of combining utility curves 
to make social demand curves. It should be noted also that 
the practical value of the above discussion is not conditioned 
by the curves combined being exactly rectangular hyper- 
bolae. The result is in any case a curve showing "diminu- 
tion at a diminishing rate," though with various possibili- 
ties of distortion from the true form of the rectangular 
hyperbola. The essential point is that the summation of 
mdividual utility or demand curves gives a social demand 
curve of the same general character. The addition of cor- 
responding terms of any two descending series with dimin- 
ishing rates of decline always gives another descending 
series having this same character.^ The compound curve 
of social demand will show the same characteristics as the 
simple utility curve. 

By "diminution at a diminishing rate " in this connec- 
tion, as throughout this essay, is meant diminution such 
that the absolute diiferences between successive steps form 
a descending series. In other words, the rate of diminution 
is conceived absolutely, not relatively, though the mathe- 
matician would mean by a constant ratio (rate) one that 
is relatively constant, and therefore, in the present sense 
and case, diminishing, while a constant ratio, in the pres- 
ent sense, is what the mathematician would call a con- 

^ The mathematical proposition to this effect is found, for example, in 
Hall and Knight's Higher Algebra, 4th ed., 1899, "Convergency and 
Divergency of Series," art. 288, p. 234. 



THE SCOPE OF DIMINISHING UTILITY 55 

stant difference. The terms of a series exhibiting a dimin- 
ishing rate, in the present sense, would yield what the 
mathematician calls variable differences with each differ- 
ence smaller than the preceding one. 

Our conclusion is thoroughly practical. For a discussion 
of the course of the diminution of utility or demand we 
need not be punctilious as to whether we refer to the indi- 
vidual or to society at large. But we should not forget 
that the principle of diminution at a diminishing rate is 
abstract in both cases and relates, as we shall later see, to 
but one kind of utility. 

To return to the question of purchasing power — a sum- 
mated or social curve of demand is composed of curves 
expressive of a great variety of conditions in this respect. 
This makes no difference as regards the form of the curve 
considered as a result of the form of the individual demand 
curve. It does, however, make a great difference as re- 
gards the social significance of the altitude of an ordinate, 
marginal or other. Quantity of utility cannot be read back 
from such a curve. A given point on the curve does not 
represent any definable quantity of utility. We might as 
well try to obtain a sum of money by counting the pieces 
in a pile composed in various proportions of all the coins 
of all the currencies of the world as to attempt to deter- 
mine the utility of an article merely by means of the price 
it fetches. It is one thing to say that the diminishing 
utility curves of different individuals in relation to the same 
kind of good can be translated into demand curves and sum- 
mated to constitute a social demand curve, and another 
thing to say that the social demand curve can, as regards 
the realized utility corresponding to the various steps in its 
quantitative gradation, be treated in quite the same way 
as the utility curve (which is practically identical with the 
demand curve) of an individual. Differences of purchasing 
power greatly affect the translation of the social variation 
of utility into a demand curve, while the purchasing power 



56 WELFARE AS AN ECONOMIC QUANTITY 

of an individual can be assumed to remain constant, and 
therefore, his demand curve is not affected Hke the social 
demand curve. The relation of riches and poverty, that is, 
of the quantity of economic means, to the significance of 
marginal utility, as that which is back of effective de- 
mand, is touched upon directly and indirectly below in 
treating of complementary utility, transputed utility, and 
finally, by way of what is practically a summary, in the 
concluding chapter. 

To return to the individual diminishing utility curve 
with reference to dealing with a point suggested by the 
watch illustration used some pages back — let us consider 
the embodiment of utility, for example, time-keeping util- 
ity, in several articles commercially described as of differ- 
ent kind, or put into different categories of goods. This 
brings up another phase of the application of diminishing 
utility, that is, to elements of utility instead of to con- 
crete goods. The analysis ought to pursue a given utility 
through different supplies. The comparisons and decisions 
of the purchaser in the market are seen to be thus analytical 
in following one kind of utility through various supplies. 
More or cheaper watches make necessary fewer clocks, and 
cheaper meat less bread. Of course this is a phase of sub- 
stitution. By disregarding the distinction between inter- 
change of units of the same supply and substitution from 
a different supply, this analytical point of view both sim- 
plifies and makes more difficult the conception of diminish- 
ing utility. It simplifies the conception by making it inde- 
pendent of relatively accidental objective likenesses or 
differences in goods. At the same time it requires more 
abstract thinking, and also raises questions as to the nature 
and importance of substitution. But substitution applies 
only for goods and not for their abstract utility-elements. 

The law of diminishing utility has direct reference only 
to the movement up or down of the marginal degree of 
utility. It would not be improper to insert the word 



THE SCOPE OF DIMINISHING UTILITY 57 

"marginal" before "utility" in the statement of this law. 
The range of movement of the margin is of course quite 
small in the practical experience of an individual so long 
as his circumstances are not greatly changed. This may 
easily lead to the supposition that the unknown intra- 
marginal region is a sort of ghost-land inhabited by no real 
super-marginal utilities but prepared on occasion to erect 
new and higher marginal utilities like stockades to protect 
against intrusion. This is not the writer's view, however 
inexact the quantitative determination of the degree of 
super-marginal utilities may be admitted to be. 

The doctrine of diminishing utility, if it is to be given its 
due scope as an explanatory principle, requires abstraction. 
The underlying law of utility variation must naturally be 
abstract. Its application is therefore to be qualified with 
reference to what is left out of account. The "other 
things" that are not always "equal" are not to be dis- 
missed as mere disturbing factors. From them and for 
them are to be sought new phases and independent prin- 
ciples of the variation of utility, to the consideration of 
which we shall shortly come, especially in the chapters 
on the complementary relation. 



CHAPTER V 

PROCESSrVE UTILITY AND EXISTENTIAL UTILITY 

Whatever may have been the original meaning of the 
word, "consumption" has now come to have as much re- 
ference to enjoyment of utility as to the usual material 
consequence of that enjoyment, which is the destruction 
of the utility. The subjective effect is in fact, notwithstand- 
ing its neglect by economists, of the greater intrinsic im- 
portance. ^ Consumption may therefore be presumed to 
have these two phases, enjoyment of utility and destruction 
of utility. To what is merely presumptive there are of 
course exceptions — in this case of very great significance. 
It may well be just the objective and market consequences 
of consumption that have given it its practical socio-eco- 
nomic importance. If goods could serve the purposes of con- 
sumption forever without subtraction from their efficiency, 
production would be very different from what it is. It would 
be an exclusively dynamic phenomenon, instead of being 
the chief subject-matter of static economics. Production 
under present circumstances assumes not only that wants 
recur, but also that most goods sooner or later lose the 
qualities by which they satisfy these wants. The usual 
material consequences of consumption, even though they 

^ Say defines consumption as essentially the loss of value that is its 
"invariable and inevitable consequence" {Treatise of Political Economy, 
book III, chap, ii, pp. 351-52 of Prinsep's translation, 1827). To Senior 
"the making use of a thing" is the essence of consumption, the destruc- 
tion of utility being imintended and generally, but not necessarily, inci- 
dental {Political Economy, pp. 54-55). The latter's conception is now 
the prevailing one. The views of both of these writers are especially 
significant because it is to them we owe "utility" as a technical term of 
economics. To Say, also, we owe the traditional fourfold division of 
economics which constitutes consumption one great branch. 



PROCESSIVE AND EXISTENTIAL UTILITY 59 

are not the necessary consequences, are thus basic for 
production. Rate of destruction, or "rate of (objective) 
consumption," is also, obviously, a direct limitation on 
enjoyment. Hence it is not inexplicable that economists 
have made so little of what should be the central topic of 
a study of consumption, that is, enjoyment. 

There are goods whose "rate of (objective) consumption " 
is zero. Gems are familiar examples. The fact that means 
of enjoyment may remain intact while continuing to serve 
their purpose, even if this state of things cannot go on for- 
ever, must have much importance for social economy. The 
mistaken assumption that the enjoyment of such goods 
involves their destruction is due partly to their occasional 
loss, which is a different matter, partly to the depreciation 
of their utility through obsolescence. Goods that endure 
cease to be adapted to changing wants, and the supply, 
owing to the dynamic character of society, if for no other 
reason, ceases to be adequate in amount. There is no ob- 
jective cost attached to the keeping and use of such goods, 
no impairment of objective capacity to satisfy, though it is 
true an "investment" in consumption goods whose utility 
and value remain constant may be said to cost "interest," 
or their exclusive possession may be said to involve the 
consumption of "time value." 

If, instead of being very exceptional, utilization without 
impairment of utility were the rule for all goods, the uses 
of a good once created would be or tend to become practi- 
cally free. If production were continued, the goods them- 
selves would tend to be free. Of course these suppositions 
are contrary to fact, although the instinct of workmanship 
is a true cause that would continue to be operative where 
the commercial value of the product no longer offered any 
reward for productive effort. The situation imagined is 
purely hypothetical and of interest only as presenting the 
extreme case, not of mere diminishing, but of diminished, 
marginal utility. Some approach, though rather remote. 



60 WELFARE AS AN ECONOMIC QUANTITY 

to such a condition, however, can be seen in the case of the 
uses of public art collections, and of some very permanent 
public constructions where amortization of investment has 
been affected. That such diminished or low marginal 
utility means small utility would be an entirely unwar- 
ranted inference. On the contrary, marginal utility is low 
only because supply, that is, the supply of uses on the spot 
in question, is large. Total utility is correspondingly great 
and average utility need not be small. 

The destruction of utility, however, is in many cases 
necessary to enjoyment. It is a part of the consumer's 
end and is clearly seen to be such. In this type of consump- 
tion, which is so much the more common as to contribute 
the most insistent element to the conception, destruction 
of utility is a part of the process upon which enjoyment 
depends. This is 'processive consumption. Its objective 
counterpart is processive utility. Food is typical of the 
class of processive utilities. But the shoe-sole that is 
worn out by use, or the display of fire-works that is en- 
joyed only as a process, are equally good illustrations. 
There is in such cases a causal connection between the 
destruction of the utility and the enjoyment or consump- 
tion of the good. 

The marble statue is an example of an opposite type of 
utility, which we have named existential. This is enjoyed 
by reason of the existence and presence of the good.^ Man 
needs for his enjoyment of it no processes or changes in it. 
His action upon it has reference only to preserving or in- 
tensifying its utility. Processes in the object destructive 
of its existential utility may occur; if they are not related 
to the enjoyment of the good the nature of the utility is 
not the less existential. There is here no causal connec- 
tion between enjoyment and the destruction of utility. The 
object of enjoyment may be "a joy forever." 

^ There is a certain analogy with Hermann's conception of Nutzkapi- 
tal, Staatswirtschaftliche Untersuchungen, 2. Aufl., 1870, p. 632. 



PROCESSIVE AND EXISTENTIAL UTILITY 61 

Objects of aesthetic feeling in a broad sense (not merely 
objects of art) are the most available examples of existen- 
tial utility. All durable goods should, and usually do, make 
this aesthetic appeal. They are enjoyed for themselves, and 
not merely for their material effects. They are effective for 
satisfaction by reason of their existence'and presentation 
apart from any destructive use. If there is such destruc- 
tion, it is accidental, or else incidental to the exploitation 
of another kind of utility. Porcelain, bric-a-brac, personal 
ornaments, precious stones, and substantial furniture for 
the home possess, in the main, existential utility. Most 
of the materials of construction of a house have this char- 
acter, while other parts wear out, though very slowly. 

The general principles determining the distinction be- 
tween processive and existential utility are simple. In the 
former, deterioration of utility is proportioned to the ap- 
plication of the good to the production of satisfaction. 
The utility in question may be entirely destroyed by a 
single act of consumption or it may yield a series of satis- 
factions. Deterioration of existential utility, on the other 
hand, is in some cases entirely absent, and in no case is it 
directly related to use and enjoyment or their result. 
There may be deterioration, usually extending over con- 
siderable time. It may also be regular, but if so it is in pro- 
portion to time and not to use. Existential utility does not 
contain the seeds of its own destruction. It is, however, 
conditioned by the durability of the object enjoyed. 

The application of these principles in distinguishing the 
two kinds of utility in the concrete is not a simple matter. 
It requires much use of analysis and abstraction. It is 
chiefly with reference to the variation of utility — which 
is the main external aspect of the economy of utility, but 
not exhaustive of the significance of the distinction in 
question — that we are here concerned. 

The distinction between processive and existential util- 
ity is not exactly parallel with that between perishable 



62 WELFARE AS AN ECONOMIC QUANTITY 

and durable goods. Economically perishable goods have 
their utility destroyed by one or comparatively few acts of 
consumption. Economically durable goods yield a rather 
long series of enjoyments. The latter, it is true, afford the 
better opportunity for the residence of existential utiU- 
ties. Hence the division lines of the two classifications run 
near each other. Food on the table may contribute to en- 
joyment by its form and looks, as well as afford gustatory 
pleasures and nourishment by its processes. Such utility as 
prepared food possesses from the former point of view is, 
abstractly considered, not processive and not economically 
perishable. The wearing of a pair of shoes, on the other 
hand, involves their destruction necessarily, causatively, 
and proportionally to their use. The fact that they are sus- 
ceptible of many more than one use does not alter the pro- 
cessive character of their consumption. A coat whose cut 
and material are pleasing to the eye wears out as a result 
of continued use for protection. It has the two sorts of 
utility, separable only by abstraction. 

Economically perishable utilities — of course elements 
of utility rather than entire goods — are necessarily con- 
sumed processively, and by definition, in one or compara- 
tively few acts of enjoyment. Economically durable goods 
may be either slowly consumed processively or enjoyed 
existentially. Economically perishable utility is a smaller 
circle included within that of processive utility. 

Physical perishability and durability also have a rela- 
tion to the distinction between existential and processive 
utility. A bouquet of cut flowers, proverbially illustrative 
of the ephemeral, is, with a qualification as regards the 
perfume, enjoyed existentially. Many forms of food are 
also extremely perishable physically, but even they may 
have some degree of existential utility. It is obvious, how- 
ever, that such goods as flowers, even though thoroughly 
enjoyable existentially, cannot be prolific of this kind of 
utility, because the period during which they can be enjoyed 



PROCESSIVE AND EXISTENTIAL UTILITY 63 

is so limited, and because it is of the nature of existential 
enjoyment to be contemplative or passive, not intense, and 
therefore not to be crowded into a brief time. Thus not 
only economic perishability, which is the case with proces- 
sive utiHty par excellence, but physical perishability, also, 
is so much an obstacle to the exploitation of existential 
utility that at first thought one would not think of the 
utility of a bouquet of Sowers as of this nature, though it 
is. The economically important forms of existential utility 
inhere in physically durable goods, often in goods poten- 
tially of infinite duration. 

It is the good that is both physically and economically 
durable that is an especially appropriate substrate for the 
development of existential utility. If we think of all goods 
as cross-classified into economically perishable and dur- 
able, and physically perishable and durable, respectively, 
then the condition most favorable to existential utility is 
found when an object is within the circle both of econom- 
ically durable and of physically durable goods. Both 
sorts of durability, moreover, offer the better substrate for 
existential utility in proportion to the length of their 
periods. But with the development of means of preserving 
physically perishable goods the physical distinction is 
coming to lose much of its importance for economics. 

Destruction or deterioration of utility is incidental to 
practically all concrete forms of enjoyment, for the kinds 
of utility are combined and a processive element enters 
into most of them. The needs of the organism require much 
consumption that cannot be otherwise than processive. 
Many highly valued goods are physically perishable. 
Finally, destruction of utility frequently comes by accident 
where there is nothing about the normal enjoyment of the 
good to cause it. The continuance of production rests upon 
no uncertain basis in assuming the deterioration and de- 
struction of existing utilities. 

The greatest significance of the division of utility into 



64 WELFARE AS AN ECONOMIC QUANTITY 

processive and existential and of goods into perishable and 
durable is in relation to saving and accumulation. Logi- 
cally, the proper approach to the consideration of this sub- 
ject should perhaps be through the diminution of utility, 
since saving is in effect the application of a portion of an 
abundant supply of present goods to a new use outside the 
present in order to obtain a higher marginal utility. But 
saving is intelligible otherwise than as a corollary of the 
principle of diminishing utiHty, and has doubtless been 
practiced on other groimds. These grounds will be seen 
to be broader than would find warrant in the merely com- 
mercial and pecuniary interpretation put upon such mat- 
ters by economists too much inclined to the business man's 
point of view. 

Saving and commercial investment are not parallel 
phenomena or different phases of the same thing. There 
are opportunities for saving and accumulation within the 
field of direct utility and "consumption." Savings are often 
incorporated in certain concrete goods accumulated for 
use, chiefly for the sake of a permanent psychical income of 
existential utiHty. Such utility embodied in physically 
durable goods will yield an income just as truly as invested 
funds. The dwelling is the most important example of a 
good that yields such income. Books and all sorts of furni- 
ture have a similar capacity. The income from a dwelling 
house is so definitely recognized and so considerable that it 
is commercialized. Indeed the dwelling is often considered 
an investment even by the man who owns his residence. 
But from the social point of view it is always a consumption 
good. 

In the case of existential income from possessions there 
is no definite quantitative relation between enjoyment and 
destruction of utility. There will be costs of maintenance, 
but these will be a very small fraction of the income if due 
attention is originally paid to permanence, with reference 
to the direct utility of such permanence as well as its in- 



PEOCESSIVE AND EXISTENTIAL UTILITY 65 

vestment value. We Americans take too little satisfaction 
in solidity of construction. The amount of utility realizable 
in this way is not to be measured by the discounted utility 
of the extended period of use. It is another matter that the 
amount of utility is of course limited by the character of 
the consumer. The too common practice of hiring or rent- 
ing very durable consumer's goods obscures the possibilities 
of the situation. Not only does the option of renting check 
this sort of accumulation, but the use of rented goods de- 
stroys some part of the income of direct utility obtainable. 
There can be no pride of ownership and there is no basis for 
the exercise of some of the finer activities of consumption. 
Development of broadly aesthetic possibilities is stunted. 

Even in the field of production it is a misfortune that 
connection between owner and goods owned is typically no 
longer direct, but takes place through the medium of ab- 
stract property. The cultivation of American farms by their 
owners forms an exception to this general rule as regards 
the nature of the proprietary relation. Of those that are 
well kept and well stocked, how many are made such 
chiefly by commercial motives or close attention to what 
pays, rather than by pride of ownership? Obviously 
few.^ But the evil consequences of the separation between 
ownership and utilization are even greater as regards 
consumption goods than as regards the instruments of 
production. 

That circumstances favor the capitalistic ownership of 
certain consumption goods is deplorable. The consumer 
should be encouraged to provide for the future. He cannot 
learn what such provision means in any better way than 
by acquiring consumption goods that will yield their 
utilities chiefly in the future. Small improvements in such 
possessions will constantly be made with little or no sub- 
jective cost, because of the pleasure taken in working 
upon one's own goods. It is therefore unfortunate that 

* Cf. Patten, Consumption of Wealth, p. 40. 



GG WELFARE AS AN ECONOMIC QUANTITY 

the growth of cities and of ground values has put the 
ownership of a home beyond the reach of so many, and 
that, in addition, the increasing importance of mobihty 
to the laborer has made the risks involved in trying to own 
a home so great. Bank deposits and abstract property have 
no advantages that quite compensate for those of putting 
savings into concrete possessions. A bank account is doubt- 
less the best form for a consumption reserve, because of 
its many-sided availability, but this seems to be its only 
point of superiority. Even this advantage is obtained in the 
Orient for savings embodied in concrete goods through 
wearing a reserve of precious metal in the form of brace- 
lets and other ornaments. The diamond may often serve 
a similar purpose in tlie West. 

Saving, in the broad sense of providing goods for future 
use, is the fundamental problem of the economy of con- 
sumption. Though the degree of development of foresight 
and prudence is sometimes excessive, it more often falls 
much short of adaptation to existing conditions. For the 
sake of increasing the availability of a consumption reserve, 
such complete abstinence from current use of savings as 
takes place when they are pecuniary and deposited in a 
bank instead of being embodied in durable articles of use 
may to a very limited extent be generally desirable. But it 
is otherwise not to be recommended. Under the conditions 
of life of the majority, investment merely for the sake of 
pecuniary income is not justifiable. Income from property, 
in contrast with income from labor, is not fundamental. It 
is rather an incident than a basis of social economy. The 
emphasis which in effect identifies providence with provision 
of income from property, with intent thus to make income 
from labor unnecessary, and proffers a general and un- 
qualified recommendation of this policy, is immoral in 
substance as well as of limited practical applicability. It 
does not take account of the impossibility of generalizing 
the plan, and supposes that what is good private economy 



PROCESSIVE AND EXISTENTIAL UTILITY 67 

is good political economy — that ancient and pervasive 
fallacy! Attention to existential utilities is, on the other 
hand, within the reach of nearly, if not quite, all men. True 
economy emphasizes lasting qualities in objects of durable 
use. Of course diminishing utility still puts limits upon 
saving, in ways that we shall later see, as well as upon 
accumulation for merely present consumption. But that 
does not alter the fact that saving should, as it does not 
under current conceptions, relate to concrete goods. '^ If 
the majority of workmen cannot, under existing conditions, 
own the capital, or even implements, that they use, — except 
in agriculture, — if it is even too risky for them to attempt 
to own their homes, it is still possible for them to surround 
themselves with substantial furniture and good household 
appliances. Here they should make a beginning. If the 
crowded and unstable life in the city is too great an obstacle 
even for this much saving of concrete goods, the situation 
is indeed deplorable. 

The significance of the foregoing distinctions for saving 
is involved, and more fully explained, in their relations to 
rate of diminution of utility. 

^ Cf. A. S. Johnson, "Influences affecting Thrift," Political Science 
Quarterly, June, 1907, vol. xxii, p. 224. His mode of approach to the 
question as to the nature and conditions of saving is different from, and 
his treatment broader than, that of the text, which is specially concerned 
only with the proposition that the fundamental form of savings is dur- 
able concrete goods. But some of his conclusions are remarkably similar. 



CHAPTER VI 

RATE OF CONSUMPTION IN RELATION TO DIMINUTION 
OF UTILITY 

If the uses of a congeries of goods are restricted to the 
present day, the diminution of utility must be very rapid. 
Processive desires are quickly sated, and the alternative 
existential utilities require time for gradual exploitation 
and development as one learns to appreciate them. If, on 
the other hand, the uses of the goods will be available 
through an indefinite future, and if, also, there will be 
opportunity for their selection and adaptation, the rate of 
decline of utility will of itself be hardly sufficient to set 
any limit to accumulation. Further acquisition will be 
checked by the cares of administering so many goods, that 
is, by indirect cost, rather than by the diminution of direct 
utility. In other words, for this second set of conditions, 
the rate of diminution of the utility itself will be very low, 
that is, the curve will slope very gradually. On the other 
hand, the satisfaction to creative aesthetic instincts yielded 
by producing such goods may cause the supply to be cor- 
respondingly abimdant and the marginal utility to be also 
low.^ 

Goods supplied under both these sorts of conditions, 
whether combined or alternative, will be subject to com- 
parison and choice. Hence the economic importance of the 
difference in respect of the rate of diminution of utihty. 

The principle of diminishing utility is ordinarily set forth 

without reference to the extent of time during which the 

utilities can be enjoyed, or else with an implied restriction 

to present time which rules out of consideration future 

1 Cf . page 59. 



RATE OF CONSUMPTION— DIMINISHING UTILITY 69 

and existential utilities. Thus to stop at the hypothetical 
oranges and apples is to shirk the task of analysis. The fre- 
quent extension of the hypothesis to include the compulsory 
present consumption of a prescribed number of oranges at 
the expense of negative utility is but a further step into 
unreality, not an illogical outcome of restricting the point 
of view to the present. Consumption is a matter of choice 
and volition. No one would choose to consume a dozen 
oranges at once, at the expense of negative utility. Acts 
which are so clearly not well-judged do not even need to be 
considered as disturbing factors. The hypothetical con- 
crete may be less real, as well as less true, than an abstrac- 
tion. To fail to consider future uses of existing goods in 
relation to the diminution of utility is to turn aside from 
an important phase of the economy of consumption. 

Rate of consumption, or rate of removal from an existing 
supply, if rapid, is so either because of physical perishabil- 
ity or because of economic perishability. High degree of 
physical perishability is the stronger case, for no inhibi- 
tion of enjoyment can prevent the depletion of a supply 
having this characteristic. Goods that are perishable in 
the physical sense must be consumed in the present, or 
in the immediate future, which may be considered a part 
of the economic present. Personal services are the perfect 
example of perishability. Fresh meat and vegetables are 
similarly perishable. The very nature of such goods limits 
to the economic present the time during which the supply 
may be applied to produce satisfaction. 

In order to utilize goods that will spontaneously cease 
to be available in a day or two, immediate uses must be 
found and wants supplied with strict regard to limited 
present capacity. The consumer may conceivably be will- 
ing to fill his stomach with fresh fruit at the cost of forego- 
ing other food. But even so heroic a measure of out-sub- 
stitution can provide for but a small addition to the supply, 
and that at the expense of a great decline in utility. Food 



70 WELFARE AS AN ECONOMIC QUANTITY 

ready for the table has a utility especially prone to fail of 
full exploitation. To contrive a way to delay or prevent 
decay of fruit and similar commodities is, when possible, 
the economical expedient, even if that involves changing 
the character of the good so radically as to put it into a dif- 
ferent class of supply. Oranges thus become marmalade.. 

A less cogent illustration of the effect of physical perish- 
ability upon rate of diminution of utility is that of goods 
physically perishable but not ministering to a physically 
limited appetite, such as cut flowers. The existential nature 
of the enjoyment makes it possible to use to advantage a 
larger supply. Complementary relations both among the 
flowers and with other objects are resources not equally 
available for processively enjoyed perishable goods. But 
the lack of effective uses is quickly felt, at least if homo- 
geneity of supply is insisted upon. Goods of this sort are 
not numerous. 

It is proper in considering the rate of diminution of util- 
ity to hold to the point of view of the individual. The above 
illustrations do this. But the expansion of demand for a 
particular good in a market is not dependent merely upon 
increasing use of it by previous consumers. If this were 
true the commercial disposal of physically perishable goods 
would be even less economical than it is. Demand is a social 
fact. New uses and fresh appetites of additional consumers 
retard the decline of commercial demand, so that the rate 
of decline of price, as supply increases, will be slower than 
the diminution of utility. Even so it is not easy to induce 
buyers to remove a glut of perishable goods. 

The diflBculty of disposing of a large supply is often so 
great that dealers find it scarcely worth while to try to 
tempt demand by lowering prices. Dealers in fresh fruit 
are therefore inclined to allow a large part of the product 
to spoil rather than radically reduce the price, even when 
they can thus reach new consumers. Whether it pays to 
try to extend demand by lowering price, thus obtaining a 



RATE OF CONSUMPTION— DIMINISHING UTILITY 71 

larger net return from a smaller profit per unit, depends 
on the rate of diminution of utility, or strictly upon its 
market representation by willingness to pay. If tlie lower- 
ing of the price one-half will not considerably more than 
double the demand, dealers may prefer to maintain prices 
by destroying part of the supply, or, what amounts to the 
same thing, by letting it destroy itseK. 

High rates of diminution of utility are evaded or dis- 
guised in various ways, so that the peculiarly high rate 
of physically perishable goods is not always recognized. 
Rates of demand for perishable commodities, determined 
by limited but recurrent use, necessitate corresponding 
adjustment of rates of supply. Whether this occurs among 
dealers or at the point of original production, the result is 
that the city-dwelling consumer does not often have occa- 
sion to exercise his ingenuity in finding new uses for a sur- 
plus. So far as the producer is also consumer, the prob- 
lem of disposing of an unexpected and unsalable surplus 
is economically insoluble. Hence the farmer's waste of 
nature's abundance in minor products. Thus to most 
consumers the high rate of diminution of utility of physi- 
cally perishable articles is not of practical concern. An 
unusually large supply is likely to be reduced to moderate 
proportions before it reaches them. 

So far as goods are physically very perishable, the time of 
consumption or enjoyment does not enter into the calcula- 
tion of the rate of diminution of utility. So far as goods can 
be stored or preserved, which is the situation next to be 
considered, time does enter into consideration. Then the 
principle becomes no longer simply and directly applicable. 
Most cases of diminishing utility are therefore compKcated 
by an element not ordinarily reckoned with. 

Rate of consumption, even where consumption is not 
coerced by the imminent physical deterioration of its ob- 
jects, may still be high. Economic perishability of high 
degree is likely to mean prompt consumption. The time 



72 WELFARE AS AN ECONOMIC QUANTITY 

intervening between production and consumption is an 
element of cost which it is economy to reduce to a mini- 
mum. Economic perishability is also likely to be accom- 
panied by physical perishability. Even where the goods 
are not physically but only economically perishable, there 
must be provision for regular replacement. Hence there 
will be a tendency on the part of the consumer to let the 
future take care of itself. 

But economically perishable goods can often be kept. 
Even if they will not bear mere storing, their condition or 
their circumstances may be so modified as to preserve a 
portion of the supply for a time. In this way an economical 
adjustment of a temporarily excessive supply, or glut, may 
be effected. Through the recurrence of appetite, articles 
which if consumed immediately would have little utility, 
may, by being held over, come to have much. Where 
rate of consumption is determined mainly by economic 
perishability, this possibility of holding over some of the 
articles may have decisive importance for the rate of 
diminution of utility. The utility obtainable from a large 
yield of small fruits has been greatly enhanced by the 
development of the art of canning. The price of potatoes 
fluctuates from year to year more than that of wheat be- 
cause one season's supply cannot so easily be held over. 

The degree of utility of the articles to be held over is less 
than it would be if they could be economically used at 
present. This is true apart from the likelihood that deteri- 
oration or change of quality may result from storage or 
from the use of preservative measures. Such effects relate 
to cost rather than to positive utility. The utility taken 
account of may likewise be less because of the room re- 
quired for storage; but the possessive or existential utiHty 
of a generous store should largely counterbalance such an 
element of cost. Mere futurity of use is the factor of fun- 
damental significance wherever physical perishability no 
longer controls the situation. By resort to preservative 



RATE OF CONSUMPTION— DIMINISHING UTILITY 73 

methods this applies even for meats and fruits. Future 
time is thus a factor in the calculation of how best to use 
an abundant supply. But, as respects its modus operandi^ 
it is merely a special case of diminishing utility. The 
utility of units at present superfluous may have full effec- 
tiveness later when the supply has been reduced. But 
their present utility suffers, or is a discounted utility, by 
reason of the necessity of postponing consumption. 

However, though constituting so large a reservoir of 
utility for goods whose enjoyment can be thus postponed, 
future uses of any kind or class, or goods having such uses, 
inevitably diminish in degree of utility as their number 
increases. For such uses diminishing utility applies through 
the discounting of the future, since the more distant the 
future use, the greater is the discount. Discounting the 
future takes away more utility from each added increment 
of supply in proportion to the remoteness of its availability. 
Even though realizable utility does not at all deteriorate 
or decrease, the necessity of postponing use to some time in 
the future causes diminution of equivalent present utility. 
If this is the only cause, the rate of decline will be charac- 
teristically slow. The reservoir of future uses affects the 
steepness of the curve markedly but does not change its 
character. 

Let us suppose a supply of like units having an objective 
(physical) value or effectiveness of one for each, all obtain- 
able now and all of such a character that they will not dete- 
riorate through keeping, but subject to such conditions 
as regards demand that one, and one only, is wanted with a 
definite and constant degree of desire each year. If the rate 
of discount is 10 per cent, or one-tenth per year, these 
articles will exhibit a diminution of utility, due solely to 
future discount, such that the successive units will be val- 
ued, as discounted, at respectively 100, 90, 81, 72.9, 65.6, 
59, and so on. But without the discount there would be no 
diminution of utility. Each article would have a utility 



74 WELFARE AS AN ECONOMIC QUANTITY 

of 100. Of course the illustration involves abstraction. 
But its point is of both theoretical interest and practical 
bearing. Without future discount, the utility of the like 
units of an increasing supply, composed of articles not 
subject to deterioration with time, but processively and 
quickly consumed, would remain constant. In proportion 
as goods approximate the character assumed, that is, in 
proportion as they are processively consumed with regu- 
larity but are extremely durable physically, they exhibit 
diminishing utility only because of future discount. This 
is of course an abstract statement of principle which takes 
no account of the cost of keeping articles for future use. 
It is abstract, also, and employs a hypothesis contrary to 
fact, in assuming for the moment the absence of future 
discount. This psychical process is of fundamental impor- 
tance in economic consumption as well as even more 
important in production. We have seen how in the field of 
consumption it constitutes a special case of diminishing 
utility. 

Wherever consumption is processive in its nature, the 
recurrence of objective need is insured. Hence any number 
of goods supplied, no matter how great, will continue to 
have some utility provided their physical quality can be 
preserved. There is no warrant for assuming that utility 
must become zero short of an infinite supply. That net 
utility may become nil, owing to the increasing relative 
importance of costs, is of course true, but that is not due 
to any principle of diminishing utility. As already stated, 
it is not correct to represent the curve of utility at its lower 
levels as typically declining sharply to zero or below.* 

To the great economy of their use, the later goods of an 
abundant supply may preserve their utility but little im- 
paired by being held for the future. One pair of shoes of a 
particular kind is all that is needed for present use, but a 
rather moderate temporary decline in price might induce 
^ Cf. Diagram I and the accompanying discussion in chap. in. 



RATE OF CONSUMPTION— DIMINISHING UTILITY 75 

one to purchase several pairs for future use. This supposes, 
of course, an appropriate place for storage. 

It is unfortunate that the conditions of city life, under 
which more and more of the people live, tend to make the 
storing of goods a function of the merchant and foster a 
hand-to-mouth existence. So far as this is the practice, 
not only is an over-supply less easily disposed of economi- 
cally, but the consumption reserve of society will also 
probably be less adequate and be maintained at greater 
real cost. The merchant can meet the cost of storage only 
out of pecuniary profits. For the consumer the cost is met 
in part or wholly by the direct enjoyment of possession 
and abundance. Objectively considered, also, the place of 
storage will be near the market when the function is per- 
formed by merchants instead of near places of consump- 
tion, where the use of room will be much cheaper. It is 
true, on the other hand, that the merchant's methods will 
doubtless be pecuniarily much more efficient, but if this 
means less labor and smaller loss, it also means the skimp- 
ing of reserves. 

The possibility of exchange introduces no complication 
in the course of the diminution of utility, though in a de- 
veloped economy it acts as a decided limitation on the ten- 
dency of the utility of a supply to diminish, especially that 
sort of utility which is embodied in durable and portable 
goods. The lowering of a marginal utility to the individual 
brings to his notice the possibility of obtaining a corrective 
gain of utility by exchange for some other article. Thus 
units of an abundant supply will be disposed of in ex- 
change for units of a less abundant supply having a higher 
marginal utility. A subjective exchange value may thus 
take the place of direct utility in the diminishing series. 
This indirect utility is nearly constant, hence the diminution 
practically ceases at what may be called the "exchange " 
point. But it is a permissible, or rather a necessary, abstrac- 
tion, to leave this factor out of consideration, since it 



76 WELFARE AS AN ECONOMIC QUANTITY 

belongs outside the field of consumption. Or, if we take the 
broad social point of view, the alternative of exchange 
disappears. Economists employ this abstraction, usually 
without mentioning it, in discussing the diminution of 
utility. 

From the point of view of society as a whole, — and also 
from that of the individual, so far as his practices are not 
warped one way or the other by his situation in a highly 
developed exchange economy, — abundance finds natural 
expression in better provision for the future and in increased 
attention paid to durability and existential utility, or, if 
such utility be embodied in intermediate goods, to "fixed" 
forms of capital. These phenomena are usually explained 
as the result of a low rate of interest. It is doubtless more 
nearly correct to say that the low rate of interest results 
from abundance of goods. But more fundamental still is 
the operation of the principle of diminishing utility. The 
consumer seeks to check the rate of diminution by pro- 
jecting uses further and further into the future through 
emphasis on permanence of subjective as well as of objec- 
tive income. 

Economically durable goods may be processively con- 
sumed — since the former quality is a matter of degree — ■ 
and physically durable goods may deteriorate. Though 
well-tanned leather is exceedingly durable, shoes are worn 
out and the need recurs. The case of processively consumed 
goods that are susceptible in greater or less degree of being 
kept for future use covers the broad middle ground between 
the extremes of goods or utilities that must be enjoyed in- 
stantly or not at all and those that may be enjoyed from 
time to time for an indefinitely prolonged period without 
requiring a renewal of the supply. This mode of consump- 
tion, through deferring the time of consumption, makes 
possible the adjustment of demand to large production or 
to a temporarily high rate of supply. Time and time dis- 
count tlierefore affect the rate of diminution of utility of 



RATE OF CONSUMPTION— DIMINISHING UTILITY 77 

this great classas indicated above. How then does it af- 
fect the extreme case next beyond, that of existentially 
enjoyed and absolutely durable goods? 

Physical durability conditions the permanence and im- 
portance of existential utility. The one is in effect the body 
of the other. The situation of existential utility embodied 
in goods that are absolutely durable physically affords the 
apparent paradox of consumption or an act of enjoyment 
with no accompanying reduction of the supply of goods. 
There is therefore no rate of consumption. If infinite or 
indefinite durability, notwithstandmg unstinted enjoy- 
ment, can be assumed, — which is, of course, the extreme 
and abstract case, — any increase of supply is also perma- 
nent. The increase occurs once for all. Duration of enjoy- 
ment does not enter into consideration in relation to the 
diminution of the utility of such a supply because the esti- 
mation of each unit takes account of all the future. Where 
goods do not of themselves decay and where their processes 
also are not the occasion of enjoyment, their comparative 
utility is not affected by changes in supply that will come 
with the passing of time, for time will have no effect on 
the existing supply. Once existential utility is separated 
(by abstraction) from processive utility, there is a case for 
the simple and direct application of the law of diminishing 
utility uncompHcated by time discomit. 

It would seem as if time discount should be of maximum 
importance and should be most effective in preventing 
rapid diminution of utility in the case of a supply of exis- 
tential utility embodied in permanent goods. But in this 
case postponement of the enjoyment of the second portion 
of a supply does not mean waiting for the first portion, 
through the exhaustion of its utility, to make room for the 
second. Such goods are not subject to consumptive pro- 
cesses. The ordering of their consumption or enjoyment 
is a problem of synchronous harmony, not of economical 
succession. Among such goods the applicability of the time 



78 WELFARE AS AN ECONOMIC QUANTITY 

discount principle is accordingly, at least in one direction, 
much limited. It is perhaps not even necessary for them to 
wait their turn in presentation, since ideas of possession, 
without presence, may give some satisfaction. If this applies 
generally, as it seems to, the diminution of utility is in such 
cases free from compHcations due to time discount. The 
case is very much like tliat of thoroughly perishable goods. 

Diminution of utility through time discount requires 
something analogous to putting a number of lines end to 
end. Lines cannot be put end to end where they are cut 
off and limited strictly to a narrow space, nor where each 
line is infinitely long. If duration of use is either completely 
confined to the present or if it goes to the other extreme 
and is not at all limited by time, rate of consumption and 
future discount may be disregarded. 

From the fact that time does not affect the degree of 
existential utility of a supply of such physically durable 
goods, nothing is to be inferred as to whether the rate of 
diminution of their utility will necessarily be either high 
or low. This depends upon the capacity of consumers. 
But if that capacity is large, or can by education be made 
so, then the utility should decline but slowly. Esthetic 
enjoyment meets these requirements. The finding of these 
aesthetic uses, however, is rather a question of complemen- 
tary grouping of different articles than of increasing a homo- 
geneous supply. But the supply may be objectively quite 
heterogeneous and still be one supply. Heterogeneity is 
merely relative, at least with regard to the principle of 
diminishing utility. The supply may, therefore, be allowed 
to contain possibilities of complementary grouping. Hence 
the relation of capacity to supply may be considered fav- 
orable to a low rate of diminution for thoroughly existential 
utilities. The rate of diminution of the utility of a supply 
of successive ounces of silver in the form of tableware 
would be very different from the corresponding variation 
of the utility of successive bushels of potatoes, chiefly for 



RATE OF CONSUMPTION— DIMINISHING UTILITY 79 

the reason that the enjoyment of silverware offers all the 
possibilities of an enduring future. The utility of fruit that 
must be eaten soon or not at all must diminish more rapidly 
than the utility of books, which may all be read in time, 
and the possession of which may be enjoyed continuously. 

Since the rate of deterioration of utility is different for 
different goods, the economic ordering of consumption 
requires the comparison and equation of different rates of 
consumption one with another, and thus of rates of supply 
and consumption with things constituting supplies that are 
to be enjoyed existentially, without "consumption" in the 
narrower sense, and to be possessed permanently. The laws 
of processive consumption have to do with rates of supply: 
those of existential enjoyment, with absolute amounts 
supplied. Newly produced diamonds are a permanent 
addition to the supply. Newly produced beef will presum- 
ably only keep pace with the appetite that destroys beef. 
Any addition to the supply of diamonds is a dynamic phe- 
nomenon, though its effect may be balanced by other 
dynamic changes. The production of beef, on the other 
hand, is ordinarily a static process. So much "per capita 
per year " or per day is the proper way to measure a supply 
of processive utilities. If this ratio remains constant, pro- 
duction merely maintains the existing equilibrium. So 
much for so many consumers, on the other hand, is the 
appropriate measure of existential utility. There need be 
no mention of the duration of time. 

The link between the two sorts of supply, and the means 
of equation, is the use of a constant rate for discounting 
future uses to the basis of the present. This rate may be 
either appropriate to the circumstances of the individual 
or standardized by the market as a rate of interest. If the 
rate of discount is 20 per cent per annum, then the present 
estimation of an absolutely permanent source of utility 
yielding a given amount of satisfaction per annum should 
be 5 times that of a processive good yielding the same 



80 WELFARE AS AN ECONOMIC QUANTITY 

amount of satisfaction in its one or few uses within the 
year. If the rate of discount is 10 per cent, the multipHer is 
10; if 5 per cent, the multipher is 20. It is assumed that the 
reader can work out the mathematics of these relations for 
himself. The principle is the same if present enjoyment is 
to be compared with that for a period extending but a few 
years into the future. A terminable annuity has a present 
value not equal to the utility of the prospective payments, 
but somewhat less than their sum. Similarly, one may com- 
pare the utility of a banquet with that of a three-year sub- 
scription to a periodical. The latter would have to promise 
a considerably greater total utility in order to be preferred. 
Such a choice always involves the principle of future dis- 
count, though the decision results from processes that sel- 
dom have any resemblance to mathematical calculation. 
It is uimecessary to refine upon the method by comparing 
processive consumption completed at once with the enjoy- 
ment of a series of uses running short of a year. 

Differences as regards the character of the curve of dim- 
inishing utility are most complicated in the concrete mixed 
cases, where the same object has to some degree both exis- 
tential and processive utility. Most goods have both these 
forms of utility, combined in varying proportions. The 
concrete case is often so intractable just because the rates 
of diminution for the two are very different. A further 
complication results from the fact that the relative estima- 
tion of the two elements is very different for different indi- 
viduals, according to their appetites, tastes, and circum- 
stances. These differences are factors in most exchanges. 
But such diflSculties do not affect underlying principles. 

Supposing the direction of its increase is controlled, a 
supply, or a congeries, of goods that includes both goods for 
the day and goods for all time will consist in its earlier 
increments chiefly of goods of the former sort, and in its 
later increments, chiefly of goods of the latter sort. Here is 
the place of normal saving, or care for future uses of goods. 



RATE OF CONSUMPTION— DBIINISHING UTILITY 81 

The order of choice in the acquisition of goods for consump- 
tion, present and future, is in general an expression of 
underlying principles of variation of utility and of the 
attempt to counteract its decline. 

In all rational judgment of utility the future will be duly 
discounted with reference to risks to life and to goods in- 
herent in the nature of things. But this is a question of 
probabilities and actuarial calculations, not of the discount 
for futurity as such, of which it is independent and not a 
part, though a coordinate factor working with it in practi- 
cal affairs. The factors here are such as should influence a 
person who contemplates investing in a life annuity. Owing 
to community and continuity of enjoyment and of interest, 
resulting from family ties, such considerations do not ordi- 
narily count for much in the economy of consumption. 

This rather lengthy discussion may be summarized as 
follows: Rate of diminution of utility is determined by rate 
of destruction or objective consumption of goods as well as 
by the degree of elasticity of the limit of capacity to enjoy. 
The decline of utility is most rapid where the nature of the 
consumable goods compels immediate enjoyment. This is 
the case of physical perishability and of a rate of objective 
consumption that is unavoidably high. In order to utilize 
an unusually large supply of such goods, appetite must be 
forced. If, under such circumstances, supply fails of de- 
tailed adjustment to ordinary consumption, the effect upon 
valuation is very marked. A high degiee of economic perish- 
ability, on the other hand, is not so effective, at least if 
preservation or storage of the surplus goods is practicable. 
Rate of consumption and conditions of demand require, in 
this case, not a certain- supply, but a certain average rate of 
supply, that is, so much per week or per year. Merely tem- 
porary over-supply will not, unless combined with physical 
perishability, cause a marked decline of marginal utility. 
By equalization of supply between seasons and from year 
to year, the rate of diminution of utility may be much mod- 



82 "^ WELFARE AS AN ECONOMIC QUANTITY 

erated. Finally, there are some goods tliat have no rate of 
consumption in either sense. They are subject neither to 
spontaneous deterioration nor to necessarily destructive 
use. Here again mere capacity to enjoy controls the rate of 
diminution of utility. It is not mere appetite, however, but 
a capacity that can be educated, and the enduring charac- 
ter of its object favors education. This sort of capacity will, 
therefore, generally show a slow rate of decline of marginal 
utility. These differences in the rate of objective consump- 
tion have an important bearing on the ordering of consump- 
tion and on the vendibility of commodities. They have also 
their general social significance in relation to forms of 
saving and of compensation for saving. 



CHAPTER VII 

THE COMPLEMENTARY RELATION 

The phenomena of consumption are subject to a "law of 
variety."^ This law is a further expression of the same psy- 
chical tendencies that are the foundation of the diminishing 
rate of diminishing utility and of the elasticity of demand. 

As goods become more abundant they are specialized in 
order to lessen the diminution of the power to satisfy. Men 
come to discriminate carefully differences of quality. Com- 
plex groups of different goods are formed in order to en- 
hance the enjoyment of consumption. Increasing civiliza- 
tion and increased accumulations of goods thus involve the 
refinement of consumption. The refinement of consump- 
tion may be described as the attentive discrimination of 
varieties and qualities of goods and the utilization of their 
differences to intensify their psychical effectiveness. 

Diversity of use, as has been shown, accounts for the 
course of diminishing utility at a diminishing rate. Fav- 
ored by objective diversity of goods, this same diversity of 
use may quite alter the character of the variation of utility 
for successive increments of goods. The unstinted satis- 
faction of one need or of a particular set of needs is not 
enough. A man turns to other and different sources of 
satisfaction with the greater strength of inclination in 
proportion as there is by comparison too much of one par- 
ticular kind of good at his disposal. This is a principle of 
value in aesthetics as well as in economics. Variety is indeed 
the great means of intensifying all feeling. This seeking 
out of new means of satisfaction would be without motive 

^ Cf. Senior, Political Economy, pp. 11-12; Jevons, Theory of Political 
Economy, 2d ed., p. 58; Patten, Dynamic Economics, p. 41. 



84. WELFARE AS AN ECONOMIC QUANTITY 

if the situation had no effect upon the variation of 
utility. 

In proportion as a number of goods are unlike one another, 
there is an increase of the possibility of an interdependence 
of the satisfactions derived from them. Variety itself may 
perhaps produce this result through the intensifying effect 
of contrast upon feeling. The juxtaposition of complemen- 
tary colors intensifies the corresponding sensations. The 
mere diversity of a collection of goods increases the pleasure 
they afford. The merchant with a varied stock of goods gets 
the trade of people to whom that very diversity is a stum- 
bling block. Each enjoyable good is not merely effective for 
itself, but the relations of the various goods are effective. 
A principle of heterogeneity crosses that of homogeneity 
in its influence upon the consumption and enjoyment of 
goods. ^ 

Heterogeneity of itself, however, merely affords oppor- 
tunity for the organization of complementary relation- 
ships. In order that goods be complements, it is also 
necessary that their uses fit into one another. Here we 
find the explanation of the utility of a " supply" of clothes 
that is really a suit, that is, a consumption group of which 
the members are interdependent. But the principle of 
diminishing utility is quite as inadequate to explain the 
successive or comparative utility of the several suits which 
an individual may acquire or possess. As regards suits of 
outer clothing, one for winter, one for summer, one for 
general use, and one for evening wear are perhaps a work- 
able foundation for a young man, though of course every- 
thing depends upon his position in society. Perhaps a 
woman would require a dozen gowns in order to possess an 
equally well-rounded wardrobe. Nor would the principle 

* Patten, Dynamic Economics, chap, viii, on "The Influence of the 
Consumption of Wealth on the Value of Commodities," is especially sug- 
gestive in relation to the signiflcance of the complementary relation in 
consumption. 



THE COMPLEMENTARY RELATION 85 

of diminishing utility explain the degree of satisfaction 
given by such a collection. But clothing is not complete 
with gowns or suits. The humorist's definition of content- 
ment as that state in which a man possesses a pair of sus- 
penders for every pair of trousers is a further application 
of the same principle. In the furnishing of a house one 
needs chairs, but not a homogeneous supply of them. In 
some chairs we want suitability for sitting upright, in 
others for rocking, and in still others for reclining. The 
principle of diminishing utility has but a remote relation to 
the rational furnishing of a home. The furniture of a room 
or of a house is a group of interrelated goods the value of 
each of which depends upon the completeness and the com- 
plementary character of the parts in the whole. So it is in 
greater or less degree throughout the field of consumption. 
The utility received from any article depends upon what it 
is in relation to that to which it is being added. 

As regards man's attitude towards goods in general, it is 
said, with an element of truth, "The more a man has the 
more he wants," seemingly in direct contradiction to the 
principle of diminishing utility. But upon examination we 
find that it is new things and difiEerent things that are thus 
wanted. A man wants to harmonize and round out the 
furnishings of his residence. He wants books to fill out the 
gaps in his private library. He wants more room in which 
to keep both. He wants a country home to which he can 
sometimes escape from the complexities of city life. We 
may as well stop here, though the able and ambitious man, 
or his wife, need never stop in the pursuit of things to "go 
with" what he already has. 

A diversification of goods adequate to diversity of de- 
sires, or such as to stimulate desire, has thus a very differ- 
ent effect from the simple increase of a supply of like goods, 
• — an effect which may possibly amount to increasing 
utility. The goods latest added to the ones habitually 
possessed and consumed are highly valued and not lightly 



86 WELFAEE AS AN ECONOMIC QUANTITY 

given up. Much apparent irregularity and extravagance in 
the spending of a limited income is due to the temptations 
of such a situation. The appeal of the novelty and of the 
thing that goes so nicely with what one already has is very 
strong. 

Complements are goods so related to and interdependent 
on one another that a part of their utility is a joint utility 
which would be destroyed by the dissociation of the goods. 
Each good that a man enjoys has, with few exceptions, in 
addition to its own particular utility, a share of comple- 
mentary utility, by so much as it is with advantage grouped 
with other goods in consumption. An increase of the supply 
of goods of the same sort is subject to the principle of 
diminishing utility. But the later goods obtained may 
bring more than a proportionate addition of utility pro- 
vided they are complements of previous possessions instead 
of being similar to them. Diminishing utility is a law of the 
variation of particular utility. Complementary utility is 
governed by different principles. 

The theory of the complementary relation of economic 
goods received its name from Carl Menger, who, together 
with Wieser and Bohm-Bawerk, have developed it and 
given it a recognized place in economics.^ But the Aus- 

^ The chronology is as follows: Menger, Grundsatze der Volkswirt- 
schaftslehre, 1871. The concept and terra " complementare Verhdltniss" 
is introduced in the first few pages and made much of throughout. Wieser, 
Ursprung und Hauptgesetze des wirtschaftlichen Werthes, 1884, and Na- 
tiirliche Werth, 1888, develops the theory of imputation, which is of course 
based on the complementary relation. Bbhm-Bawerk's contributions are 
contained in his Grundzuge der Tkeorie des wirtschaftlichen Giiterwerthes, 
two articles in the JahrbuchfUr Nationalokonomie, 1886, and in his Posi- 
tive Theorie des Kapitals, 1889. The articles on Guterwerth pay much atten- 
tion to replaceability, of course in the complementary group, as deter- 
mining value. The prominence of Bohm-Bawerk in the discussion of 
capital and interest has made him, it seems to the writer, to an undue 
extent the interpreter of Austrian theory generally, at least in America. 

All these Austrians pay little attention to anything besides the inter- 
relations of the factors and means of production. Menger is as much 
interested in the serial interdependence of the different orders of goods 



THE COMPLEMENTARY RELATION 87 

trians concern themselves with the value-interrelations of 
productive agents only. The interdependence of land, 
labor, and capital is doubtless the best illustration of the 
complementary relation, as well as its most important 
application in economics. But the relation of goods to one 
another as means of enjoyment is also highly important 
in consumption, and is perhaps more fundamental. Such 
attention as this phase of the subject has received is 
chiefly due to Professor Patten.^ In the case of the comple- 
mentary relation of factors of production the utility re- 
sulting from grouping becomes largely imputed economic 
value. Imputation of value, though based upon the com- 
plementary relation, involves something more than that, 
and will be considered later in connection with transputed 
utiUty, which is its representative in the field of con- 
sumption. Here we are considering complementary utility 
as such, without reference to the frequent but not neces- 
sary result, transputation or imputation. 

Entirely satisfactory illustrations of complementary 
consumption are difficult to obtain only because it is so 
omnipresent. There are so many interrelations of each 
good, and these interrelations are often so complex, that it 
is not easy to detach one group. Only by abstraction can 
one group be separated from others, and the grouping may 
be largely due to historical coincidence. Beer has been 
called "the syncretic accompaniment of sausage," and the 
connection is certainly more than an accident in the history 
of civilization and of nations. Its bitterness as well as, in 

— an idea incidentally referred to above at page 11 — as in their con- 
temporaneous cooperative grouping. He extends the term complementary 
in a special wider sense to cover both sorts of interrelation (p. 11). This 
does very well in the field of production. But we should hardly speak of 
a complementary relation between a good of the first order and those of 
remoter orders upon which its enjoyment depends. In consumption, 
complementary goods must be thought of as used in conjunction with 
one another and as all of the first order, while for goods of remoter order 
degree of remoteness does not matter. 

^ Theory of Consumption, 1st ed., 1889, and Dynamic Economics, 1892. 



88 WELFARE AS AN ECONOMIC QUANTITY 

Germany, its cheapness, appear to fit it for this association. 
But who can prove complementariness when the associa- 
tion is also a precipitate of centuries of history? Beer- 
drinking is a time-honored Teutonic tradition. Feudalism 
and the retardation of the peaceful economic development 
of civilization long kept swine-culture unduly prominent in 
Germany. Pork needs to be highly seasoned, and sausage- 
making is in part a device for the thorough seasoning of 
meat. Thus the association may be traced to historical 
causes. At any rate, historical and other factors are inter- 
woven. 

The determinate association of certain condiments, 
sauces, and salads with certain other dishes in skilled 
cookery ought to furnish a long list of illustrations of har- 
monious consumption groupings. The chef who is really a 
master of his art has a repertory of such harmonies of 
taste and smell, which, for their full eflfectiveness, must 
further receive appropriate setting of tableware and linen 
and other accompaniments. The skill of the housewife 
depends upon a delicate sense for complementary relations. 
Homelike living conditions are the product of the comple- 
mentary association of many economic and other utilities, 
the absence of any one of which may be destructive of 
happiness. Home makes its strong appeal because of its 
complex harmonious stimulation of so many important 
instincts and interests. Comfort also is a result of com- 
plementary conditions. 

The pecuhar field of the complementary relation is in the 
"comforts" of life. Discomfort is usually due to the fact 
that our surroundings, and by reflection ourselves, are 
"out of joint." Comfort suggests a due, and only a due, 
dependence on things material, a position which should 
strongly commend itself to the economist. Necessaries are 
too exacting. They control the consumer more than they 
are controlled by him. Luxuries, if not thoroughly adventi- 
tious, are too much a matter of caprice and are unamiable. 



THE COMPLEMENTARY RELATION 89 

Comfort is modest and unpretentious. That it smacks of 
the material should not be held against it. 

Mere sumptuousness is in bad taste, because it is an 
evidence of failure to find or exploit complementary rela- 
tions, and thus of inefficient consumption. In dress and 
in entertainments, not expense, not lavishness, but the 
harmonious adjustment of parts in a whole is most effec- 
tive. 

We have assumed that heterogeneity of goods is neces- 
sary to their bearing a complementary relation to one 
another. The situation out of which, it appears, the com- 
plementary relation emerges is that of relatively simple 
desire over against a complex of goods. The desire for the 
comforts of home, though psychologically simple, is com- 
plex in its economic manifestation. But is this hetero- 
geneity of goods a necessary condition of the complemen- 
tary relation? It would seem that twelve dinner plates of 
one style are complements of one another, and that a 
number of curtains of the same sort are needed to complete 
a set. But the set of curtains is wanted for a particular 
room or house. The curtains are really the complements of 
the windows. The dinner plates, also, are complements of 
the other dishes of the set and of other table furnishings, 
perhaps even including the guests. Likeness, even as an 
occasional basis for complementary utility, will not stand 
analysis. It may enter, but only as a minor and somewhat 
accidental part of a situation which as a whole is one of 
heterogeneity. Unlikeness is a fundamental quaHfication 
for the complementary relation. 

It is natural to compare the complementary relation in 
economics with the effect upon the intensity of sensation or 
the juxtaposition of complementary colors. There is more 
than an analogy, but also less than a perfect analogy, be- 
tween these two cases. Some economically complementary 
effects are doubtless due to the intensification of the specific 
quaUty of each member of the group. But in general the 



90 WELFARE AS AN ECONOMIC QUANTITY 

group has its own peculiar character distinguishable from 
the contribution of each member. 

The complementary relation is much too general a phe- 
nomenon to conform itself fully to economic conceptions 
or to admit of clear-cut delineation and exposition from 
this or any other single point of view. Recreational plea- 
sures are the complements of labor, each having a bene- 
ficial effect upon the utility of the other. Luxuries are 
complements of simple necessaries. Hence the danger of 
too great freedom from the need of economy and of care 
in expenditure. But in economics only utilities that admit 
of economic conception and manipulation, that is, in the 
highest degree, those embodied in concrete goods, can be 
included in a theory of the complementary relation. Ethics 
should, of course, go farther. 



CHAPTER Vin 

THE STANDARD OF LIFE AS BASED UPON 
COMPLEMENTARY UTILITY 

The most important case of the complementary relation in 
consumption is that association of necessaries, comforts, 
and luxuries which constitutes a man's standard of life.^ 
The standard of life is a psychical fact. Stability is imparted 
to it by both the habits and the ideals of which it is com- 
pounded. Whatever is considered a part of the standard of 
life has an accession of importance by reason of this relation. 
It will not be sacrificed lightly. The most importunate 
instinct may be held in check by regard for the standard of 
life. Hence the point of its definition as consisting of those 
articles of customary consumption which a man will not 
sacrifice for the sake of marrying. Whenever the pleasures 
and comforts of marriage and family life are postponed for 
the sake of continuing the consumption of certain articles, 
these are held to for the sake of more than their own parti- 
cular utility. 

It is because of its character as a group of complements, 
moreover, that the standard of life, once destroyed, is not 
easily built up again. A generation brought up under harder 
conditions of life does not know the meaning of a higher 
standard, since it is able to enjoy only one or two of its 
components irregularly and piecemeal.^ The complex 
group is no longer to be known as such. There is little or 
no opportunity for the mass of such a population to be- 
come familiar with or adapted to the better standard. 

^ Duly recognized as a phenomenon of the complementary relation by 
Patten, Dynamic Economics, chap, xx, "The Standard of Life." 

^ Cf. Walker, Political Economy, sec. 346, for an effective statement of 
conditions, though not in terms of the complementary relation. 



92 WELFARE AS AN ECONOMIC QUANTITY 

A high standard of life, involving the use of an extensive 
variety of articles of consumption, though fundamentally 
a psychical phenomenon, is favored or hindered by environ- 
mental conditions of supply. Passing reference to some of 
these matters will illustrate the character of the standard 
of life as a phase of the complementary relation. 

Food plays the largest part in the consumption of the 
majority, and the standard of life is therefore especially 
related to the conditions of food supply. Where one great 
article of food is much cheaper than any other, under eco- 
nomic pressure there is a temptation to subsist more and 
more upon that alone. Unrestrained multiplication is likely 
to result in peopling up to the food supply and in hard and 
precarious subsistence for the masses. This is why it can 
be said with a good deal of truth that the potato was the 
ruin of Ireland. The monotonous rice diet of the masses in 
the Far East, also, is an important clue to economic condi- 
tions there. The situation is much better when several 
articles of food do not greatly differ from one another in 
cost, so that there is not much temptation to simplify con- 
sumption and little danger of losing the advantage of 
choosing and combining articles of food from diverse sup- 
plies in a complementary relation.^ The more costly a 
nation's staple food is, the more easily it finds complements 
and substitutes. Wheat is better than potatoes, because 
the actual comparison is between wheat with other accom- 
paniments and alternatives and potatoes with nothing else.^ 
Partly for a similar reason, the standard of life is likely to 
be higher in a cold than in a warm climate, since in the for- 
mer animal food, as compared with vegetable, is less expen- 
sive than in the latter. The increase of agricultural rent 
resulting from the increase of population promotes a varied 
diet, in so far as it requires more intensive cultivation and 
the combination of different crops, either at the same time 

1 Cf . Patten, Consumption of Wealth, p. 46. 

2 Ibid., p. 48. 



THE STANDARD OF LIFE AS COMPLEMENTARY 93 

or in rotation.^ The reduction of the cost of transportation, 
by reducing the cost of imported articles of consumption, 
notably the products of the tropics, favors variety in con- 
sumption and the development of further complementary 
utility.2 

We may expect another important effect of an increase of 
agricultural rent upon the standard of life. An increase in 
the proportion of the price of raw produce taken by rent 
means relatively higher prices for the raw produce than for 
the superposed processes of manufacture and hence a de- 
crease of the distance between merely enough food, that is, 
bare subsistence, which is by comparison raw produce, and 
a comfortable living, which requires some elaboration of 
goods. ^ This connection has, however, been obscured by 
the improvidence of laborers which has generally accom- 
panied increase of population and high rents. Technical 
improvements in manufactures also work in the direction of 
making relatively slight the difference of cost between bare 
subsistence and comfort. The laborer is not so likely to 
lose, or if he does lose, he can more easily regain, a better 
standard of life if the finer processes and products are rela- 
tively inexpensive. The cost of the raw materials that go 
into a loaf of bread is said to be about one fourth the price 
of the loaf as retailed. For this country the ratio of 3 to 1 
is probably fairly representative of the present relative 
costs of the simpler forms of manufacture and sale as com- 
pared with the cost of producing raw materials. Such 
ratios are not most favorable to a high standard of life. 
The extensive opening up of new lands to cultivation in 
the last century was less of a permanent benefit to human- 

1 Walker, Political Economy, 3d ed., 1888, sec. 398, emphasizes the 
"craving for a diversified diet" — which reminds one too much of "the 
propensity in human nature ... to truck, barter, and exchange" alleged 
by Adam Smith. 

2 Patten, Consumption of Wealth, p. 64. 

^ Cf. Ricardo, Principles of Political Economy and Taxation, chap, v, 
paragraph near the end of sec. 37. 



94 WELFARE AS AN ECONOMIC QUANTITY 

ity than the contemporaneous improvement and cheapen- 
ing of manufacturing processes. 

If technical improvements should come to be more effec- 
tive in reducing the cost of food and raw materials than of 
manufactured products, it would be a misfortune. If they 
should take a turn such that some single standard food 
could be manufactured cheaply by chemical processes, a 
situation would arise that would be of all external condi- 
tions the most unfavorable to a high standard of life. For 
it can be assumed that human nature would continue to 
remain what it is and that men would therefore continue to 
need economic props to aid in protecting them from their 
own primitive impulses. The extensive direct fixation of 
nitrogen would be less disastrous, for it would not involve 
less variety in food, since lavish fertilization of the soil 
would favor the production of many kinds. But it would 
make many of the important permanent possibihties of 
satisfaction cost relatively more than at present. Rela- 
tively cheap food is anything but an unmixed blessing for a 
people. 

An illustration of the effect of relative costs upon choice 
in consumption and upon the standard of life is to be seen 
in the character of dwelling-houses in very large cities as 
compared with those in the country. The difference may 
be partly due to the requirements of fire protection in cities, 
and also to the stronger tendency of the city-dweller to 
spend for consumption up to the limit of his income. But 
this is not all. City houses are more expensively built 
partly because the cost of a dwelling, including the site, is 
so largely the cost of the latter. Consequently, a small per- 
centage of the total cost makes all the difference between 
tolerable and elegant quarters. In the country, on the 
other hand, the dwelling usually contains plenty of room, 
but its construction is likely to be anything but solid or 
elegant. The cost of mere room in large cities is very great, 
hence the pressure of the housing problem. If comparisons 



THE STANDAED OF LIFE AS COMPLEMENTARY 95 

are made on the basis of a given level of solidity and finish, 
in house construction, however, one can scarcely question 
that the proportion of the population of the country in this 
sense poorly housed is much greater than that of the city. 
For the sake of having highly polished hardwood interior 
finish, the dweller in the country might have to sacrifice 25 
per cent of his room, while the city dweller may need to give 
up only 10 per cent. Following the line of least economic 
resistance produces very different results under such differ- 
ing conditions. 

The division of consumable goods into necessaries, com- 
forts, and luxuries is varied somewhat by Senior, who sub- 
stitutes "decencies" for the middle term.^ Decencies and 
comforts are to some extent the same goods looked at from 
different points of view. The former are things one must 
have in order to maintain a tolerable social status. Thus 
the demand for comforts, in the character of decencies, is 
supported by the greater esteem in which their possessor is 
held. But the complementary relation is more fundamental 
than this last factor. As compared with the demand for 
luxuries, the desire for comforts gets its cue but little from 
other human beings. But there are some minds all of whose 
choices are imitative. 

The reasons why the maintenance of a tolerable standard 
of life is held to be of so great importance by the intelligent 
consumer do not appear in their entirety merely from the 
consideration of complementary utility. The positive at- 
tractions of a high standard are chiefly phases of the com- 
plementary relation. But there is also a powerful vis a 
tergo operative to prevent an easy surrender of goods not 
necessaries. Bare necessaries, and goods in general so far 
as consumed in that character, make little or no contribu- 
tion to satisfaction. The development of this point forms 
the subject of a later chapter.^ 

The economic function of the family is the care of con- 
1 Political Economy, p. 36. ^ Chap. xi. 



96 WELFARE AS AN ECONOMIC QUANTITY 

sumption. This applies generally at present and also seems 
to be the best permanent adjustment. At one time produc- 
tion also was organized upon the basis of the family unit. 
But progressive economic differentiation and division of 
labor have now almost completely stripped the family of 
productive functions. It is natural that, as women find 
work in the home a less secure foundation for existence, 
more of them seek industrial occupation. Or, in the 
"higher" social strata, they may have no serious occupa- 
tion or avocation at all. The effect reacting upon the cause, 
women become less fit for home-making. The home tends 
to be no longer the center of education for the child nor of 
recreational interests for the husband. For a man to marry 
may thus come to mean hardly more than his undertaking 
to pay the board bills of two instead of one. But perhaps 
the wife continues "at work." One breadwinner does not 
then need to earn enough for a family and perhaps cannot. 

The present tendency, as foreshadowed in the large 
cities, threatens to leave to the family no economic func- 
tions at all. If there is any truth in the theory of an eco- 
nomic interpretation of history, it must then go badly with 
the family. The institution was not founded upon sexual 
relations, and will not be secure upon such a basis, no mat- 
ter how much suffused with romanticism. The "emancipa- 
tion of women" has its advantages, of course, but, so far 
as it means that women in general may expect to free them- 
selves from household cares, it must bring vastly greater 
disadvantages both to women and to society. The care of 
consumption is entirely worthy of being the chief interest 
and occupation of half of mankind. The unity and conti- 
nuity of the family are essential for the due exploitation of 
complementary and of existential utilities. 

Social atomization is destructive of both moral and eco- 
nomic standards. The effectiveness of the family as the 
custodian of the standard of hfe is endangered by present 
tendencies. A high standard of life is so much a matter of 



THE STANDAED OF LIFE AS COMPLEMENTARY 97 

habit and tradition that it needs the services of the family as 
its transmitting medium. It is made general or continued 
general by such influences as are represented by a sound 
family life. The social importance of a high standard, more- 
over, is conditioned upon its being a mass fact. If a high 
standard controls the conduct of only a few, it must be 
quickly swamped. 

The standard of life is the central fact in the dynamics of 
consumption, and hence is of dominant importance for the 
theory of economic and social progress. For the purposes of 
this analysis of utility, however, the point of view of which 
is essentially static, we have already pursued this subject 
far enough. 



CHAPTER IX 

COMPLEMENTARY UTILITY IN RELATION TO THE 
VARIATION OF UTILITY 

If the principle of diminishing utility were applicable with 
anything like universaUty and absoluteness, the utiUty of 
the marginal portion of income or consumption would vary 
inversely as the amount of income. The strength of attach- 
ment with which a man with a moderate income holds to 
the consumption of articles which are clearly not indispen- 
sable is contrary to that hypothesis. His judgment of their 
value is doubtless due in part to the influence of conven- 
tional social standards upon him, but it is also due, or 
might be due, to an entirely rational valuation of comple- 
mentary goods. The fact that the individual's judgment is 
conventional rather than justified by his own reasoning does 
not mean that his estimation of the utility of goods essen- 
tial to his standard of life is any the less reasonable. 
Viewed in the concrete, there is a stage in the acquisition 
and consumption of goods within which the principle of 
diminishing utility does not hold, or at any rate, does not 
dominate the situation. 

It is not enough to meet this argument by limiting di- 
minishing utility to the case of a homogeneous supply. The 
principle never has been so limited. It is of too great signifi- 
cance in economics to be confined within such bounds. It 
does apply abstractly to the increase of goods in their most 
general quantitative aspect, that is, to the amount of pos- 
sessions or income as measured in terms of the standard of 
value. A dollar, and a "dollar's worth," has less utility to 
the well-to-do business man than to the day-laborer. One 
hundred dollars or one thousand dollars mean much less to 
the very rich man than to the well-to-do. If these proper- 



VAEIATION OF COMPLEMENTARY UTILITY 99 

tions are correct, then diminishing utility holds, in some 
sense, for income in general and for the goods of which, in 
the last analysis, it consists. 

As a general proposition, assuming the rational ordering 
of consumption, the good yielding most utility will be first 
obtained, then the one having the next greatest utility, and 
so on down. The application of initial units of a supply to 
the most important uses first and then the progressive de- 
crease of the importance of these uses means diminishing 
utility. But this situation and the argument based upon it 
apply, not only to a homogeneous supply, but equally well 
to a heterogeneous collection of goods in process of being 
acquired, with the qualification, of course, that the comple- 
mentary relations of the heterogeneous goods be left out of 
account. Diminishing utility relates to particular utility. 
We have here occasion to predicate only that the principle 
holds for the particular utility of a varied collection of 
goods as well as for a homogeneous supply. 

The variation of complementary utility is another matter. 
Complementary utility may quite disarrange any calcula- 
tions of quantitative variation that leave it out of account. 
Since diminishing utihty does not hold for complementary 
utility by itself, it does not always hold for complementary 
utility plus particular utility. The standard of life is a case 
of complementary utility, hence its influence on the varia- 
tion of the utility of increments of income, so far as such 
increments mean something for the standard. Diminishing 
utility does not hold absolutely and step by step. Even 
supposing the necessities of each recipient are the same, 
$100 may in the concrete mean as much when added to a 
particular $2000 income as when added to one of $1500. 
For reasons stated elsewhere, this situation holds especially 
for moderate incomes. 

Curves are the best means of expressing quantitative 
variation, hence a discussion of subjective economics can 
scarcely escape using them. The relation of thecomplemen- 



100 WELFARE AS AN ECONOMIC QUANTITY 

tary character of successively obtained goods to the varia- 
tion of their utihty may best be illustrated by hypothetical 
curves. The typical curve of diminishing utility, on the 
assumption that it expresses the relation described in chap- 
ter III, may be drawn as in the upper half of Diagram III. 

Now, if we suppose that the additions to the number of 
goods available for consumption consist of needed articles 
of furniture instead of further pecks of potatoes or loaves 
of bread, the addition of these articles will bring utility 
not merely on account of the uses to which they may them- 
selves be put, but also on account of the greater com- 
pleteness with which the home is furnished. When the 
"chunks" of commodity are reduced to like units as to a 
common denominator, the particular utility proper of each 
article, that is, the utility of each article in the uses to 
which it can be put detached from others, will conform to 
the principle of diminishing utility. The absolutely needed 
articles will be first obtained, owing to their high particular 
utility. Others will follow in the order of urgency or need 
relative to cost. Complementary utility will scarcely count 
for the earlier half of the articles obtained, though a 
rational choice will pick them with reference to the future 
completion of a harmonious group of goods. Complemen- 
tary utility as well as particular utility may influence the 
order of purchase of goods later acquired, but scarcely 
very much, since the amount of complementary utility 
depends more upon the steps still to be taken to complete 
the group in mind than upon the particular character of 
the good. Particular utility wUl unfailingly follow the 
principle of diminishing utility. Complementary utility 
will be supplementary, and in effect a premium upon the 
completion of the group. The additional or complementary 
utility will thus operate to modify the course of the 
variation of utility as represented in the lower half of 
Diagram III. 

There should be no question as to the possibility of the 



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VARIATION OF COMPLEMENTARY UTILITY 103 

variation of utility working out this way. The practical 
significance of such "increasing utihty" is evident. 

It might be questioned whether the complementary 
utility belongs to the units to which it is credited. But the 
increase in the number of goods will none the less mean such 
a variation in the quantity of utility successively added as 
is indicated. The apportionment of the utility to the sepa- 
rate units, as their property, is not essential. It is just as 
easy, or just as impossible, to pick the "first" unit out of a 
completed supply as it is the economically "last" or mar- 
ginal unit. The existence of complementary utility is no 
more dependent upon its inhering in a particular physical 
unit than is the existence of the initial or of the marginal 
utility. 

As to whether complementary utility is fully taken into 
account, as particular utility is, in the order of acquisition 
and consumption, a small portion of it may be so dealt 
with, that is, so far as a particular good, let us say the 
seventh of a group of ten, may be also effective to some 
extent as completing a provisional group of seven. But 
most of the complementary utility brought by the tenth 
unit is due, not to its being the particular good which it is, 
but to its being the tenth of a group of ten. Any preceding 
unit will naturally have more particular utility, but it is 
the last to be acquired that brings most complementary 
utility, because it completes the group, the other nine 
being already there. Even as regards the seventh unit 
mentioned above, whatever complementary utility it brings 
is brought because it is the seventh and last unit of the 
provisional group of seven. The complementary utility 
thus made available, while it gives number seven prece- 
dence over numbers eight and nine on the ground of degree 
of utility, may also mean such a superiority over number 
six that its coming after that number means increasing 
utility. 

It would not be diflScult to find economists who would 



lot WMI.FAitE AS AN ECONOMIC (illAN'n'I'Y 

allinii as u priiu'iplo wllliout. fpialiflciilion llial Tood is 
,siil)j<'('l It) IIk' laAV <>r (liiiiliiisliiii^ ulilily. On |)iilliiig this 
I)r<)]K)sili<>ii into the concrete tlic economist will most likely 
eoiifinc llie illiistnilion to one sort of food, say bread. Then 
lie will }j;('ii<Tali/e on lliis basis. Let ns see if the principle 
of diMiinishiiij^ nlilily does adecpiately fornndate the (jnan- 
iilalive variali»)n of ulilily in the case of the successive 
ineremenls nioulhfuls, forkfuls, or sj)oonfuls — of a 
meal. The elasl.ieil.y of consumplion ^roupin/^s will have 
the elTeel of making any ilhisl ration somewhal unreal. But 
this does not alVeel the principle. It is i)roj)ose<l to api)ly 
the ])rinci|)le lo u silualion that is enlirely concrete and, 
thou^^li hy])olhelical, wilh no siji;ni(icant elements omiLled. 
1 1 nmsl, be granted that I he consumer is lo control I he order 
in which he is to receiv*' the ineremenls, this being a nec^cs- 
sary ])oslidale of tliminishing ulilily. To reduce our mis- 
cellaneous foods to a conunon denominator, we shall have 
to liike a, money measure of Ihe unil, say the nickel. TIk'U 
suppose llie choict^ is of a unit of each of Ihe following: 
hn'ad, butter, eoll'ee, d(\sserl, meat, nuts, }>olal.oes, salt, 
snhul, sauce, soup, sugar, and water. In onh'r lo keep the 
jiarlicular ulilily of each unit separale in Ihoughl, suj)j)ose 
nlso that the re<iuesl for each will be granted only afler 
two miniiles, or Ihal this much lime must elapse betvv(>en 
each reciuest. 

The articles being chosen by a hungry man wilh r(>l\>r- 
ence lo I heir parlicidar ulilily and c«)iis(imed as soon as 
«>blaincd, Ihe order might be meal, bread, waler, I'lc. 'I'he 
man wouM <loublless experience a diminulion of ulilily 
for each successive art icK' ihus iimnedialely and separately 
«-onsimu'd. lint even he would do belter to postpone a j)arL 
of I he consiunption in order to avail himself of complemen- 
lary ulilily. lie would want salt with the meat and butliM* 
wilh the bread. 

A man who was merely comfortably hungry might ask 
for soup llrsl or perhaj>s water, lie trrlainly Wi>uld not ask 



VARIyVTION Ol-^ COMl'LEMENTARY UTILITY lor. 

first for the articles from which he expected the greatest sat- 
isfaction. Furthermore, he would ])robal)ly not care to con- 
snnic tlie son]) until he liad salt, bread, juid hntter, to ^o 
with it. (^>n(iiK:d to I, lie ahovc^-nuviitioiicd consliliKMil.M of a, 
modest dinner, he would next choose meat, but would not 
care to e.it nuieh of it nniil he obtained its eoni])l<Miicnts, 
potato, salad, and ])erliii,])S meat sjukx;. ]hi .•ilic.-uly has 
salt. lie would then want an incrcMrumt of (•ollV{\ niid of 
sugar, again as co]n])l<Mnents. ]*r(\sniMaJ»ly he wonhl WJUit 
dessert with these. His bill ol" Hnrc. might be arranged tlnis 
(the items to be read horizontally): — 

Water 

H(>ii]> Salt IJroad Butter 

Mc'ut Potatoes Vc^'ctiihlo aaljid Mc-U, sauce 

])<'.s,sort CoU'eo Siig.-ir ]Sliit,s 

But the full importance of complementary ulility is not 
measnnnl by the (^llVet, of tlu; strictly ttontcniponuicous 
combinations that could be made. Sonj) com(\s before; meat 
because tliat is the pro])er order in which to get the Ixnavfit 
of th<; complementary ulJIily that results from th<'ir being 
grouped. The entire meal, with its setting, is u, single; group 
of com])lcraentary goods. The satisfjurtion obtained from il; 
lias little or nothing t.o do with diminishing utilily. 'i'he 
reason is that the utility of the meal is chiefly comj)lemen- 
tary in its nature. 

Tli<> illustration is ojx'u to criticism in oik; ]):i,rllenlji,r. It 
might be claimed that the consumer should be coinpelled 
to choose each unit as if it were the last in order that he 
might hav<; n motive io take; riceount of nil possibh; ]);trti(;u- 
lar utility at each step and would not, for (rxjunph;, :i,se(!nd 
from soup to meat. This situation, would limit thx; ])OMsi- 
billty of o])taining compl<rir)<!nl;i,ry tjtility, l)ul; in ii, way 
unjust to it, for i)lanning would no long<!r Ix; ])ossible. 
Perhaps the proper modification to be made in the illustra- 
tion would b<; to follow tlu; VJiriiition f)f utility a„s Ix^twec^n 
fixed supplies or combinations of the articles of dilicrent 



106 WELFARE AS AN ECONOMIC QUANTITY 

extent chosen from such a list as the one used above. But 
this would involve such complexities in the illustration as 
to make it no longer feasible here. As regards the real 
utility of the initial units of a very limited supply of food, 
moreover, it is doubtful whether the hypothesis of a fixed 
supply would not introduce a grave error, as shown in a 
later chapter, ^ on account of the possible transputed charac- 
ter of such utility. Certainly complementary utility would 
be a factor in the choice of marginal units after the fear of 
not having enough to satisfy exigent need was passed, and 
sometimes it would be highly enough appreciated to modify 
the course of the utihty curve radically. Additions to 
existing supplies, furthermore, may be made in the light of 
new knowledge of complementary possibilities, and even 
though this is a dynamic factor, complementary utility 
should receive credit for it. Perhaps this new light means 
no more than the ingenuity necessary to find any uses at 
all for the later units of the abundant supply for which 
diminishing utility is of dominant significance. 

That the appropriate association of different foods has a 
very great deal to do with the satisfaction obtained from 
them every one knows who has sat waiting in a restaurant 
for a group to be completed. That the groupings will be 
different according to personal idiosyncrasy adds another 
to the difficulties in the way of finding illustrations that will 
be generally understood and appreciated. But the signifi- 
cance of complementary utility is not therefore less great, 
but only the more likely to be not duly recognized. 

An illustration along the lines of the dinner might be 
worked out for the furnishing of a house. 

In order that the principle of diminishing utility may be 
overborne, it is not necessary that the effect of complemen- 
tary utility should amount to absolutely increasing utility, 
though there is no reason why it cannot on occasion. The 
hump on the curve of diminishing utility may be there still, 
^ Chap. XI. 



VARIATION OF COMPLEMENTARY UTILITY 107 

even though its upper edge be no more than horizontaL 
This is illustrated in Diagram IV, opposite page 103. Of 
course we are assuming that the principle of diminishing 
utility works with a degree of regularity, and that the 
rate of decline is not arbitrary. 

That the principle of diminishing utility is often over- 
borne depends upon the fact that consumption groupings 
are provisional and elastic and that there is always likely to 
be, so to speak, a stock of complementary relations avail- 
able and waiting for the accumulation of purchasing power. 
Complementary utility is not something obtained once for 
all. Its accessions educate to new outlooks and further 
ambitions. It is thus a factor in the estimation of most 
purchases, though not always highly important. 

The effect upon utility of the obtaining of a comple- 
mentary good may be paradoxically described as analogous 
to the addition of 2 plus 2 to make 5. Certainly the sum of 
the particular utilities of the complementary goods does 
not equal the utility of the group as a whole. It is only in 
physics that 2 plus 2 equals 4, no more, no less. In psychi- 
cal matters, under the operation of the principle of dimin- 
ishing utility, 2 plus 2 equals only 3, or perhaps 33/2- But it 
is equally possible for 2 plus 2 to amount to 4 or 43^ or 5, 
provided the second 2 is a complement of the first. We are 
too much tied down to the objective and the physical in 
our conception of quantities and quantitative relations, 
and if we escape that, we too often fail to perceive the bear- 
ing of the complementary relation on the variation of utility, 
because to observe that relation we need to have the group 
already formed before us. We are thus too likely to con- 
template the relation merely as a result, instead of as a 
process, thus missing the variation of complementary 
utility. 

This reasoning, according to which 2 plus 2 may equal, 
not only 4, but also either 3 or 5, may appear to the reader 
fallacious. Formally, so it is. But the idea nevertheless is 



108 WELFARE AS AN ECONOMIC QUANTITY 

practically sound and Its mode of expression pertinent. The 
2 and 2 are of course physical objects. The sum or result of 
their combination may be either physical or psychical. 
When it is psychical there is no reason why it should be 
invariably proportionate to the number of physical units 
rather than proportionate to less or more than their sum. 

For the study of the quantitative variation of utility, 
it is the effect of the introduction of the completing good 
that is important. The group once formed, the last ac- 
quired complement loses its distinction, and the comple- 
mentary utility obtained is correctly thought to be no more 
connected with it than with any other member of the group. 
If there is a "law" of increasing utility, it is in a sense 
dynamic in its nature. But this is equally true of diminish- 
ing utility. A merely static reckoning with particular 
articles of consumption need take account of neither. But 
in this sense all expenditure for goods that are not promptly 
destroyed by use is dynamic. The furnishing of a house 
from the income of a newly-married couple is not mainte- 
nance, it is development. Even the consumption of food 
among the comfortably situated is not usually entirely 
static. The chief dynamic phenomenon of consumption is, 
perhaps, this founding of new groups of complementary 
goods. 

It is natural that the effect upon the course of utility of 
the adding of like goods to the number of those available 
for consumption should first attract attention, and that it 
should still cause neglect of the effect of the complementary 
relation in consumption. It requires unusual importance of 
the groupings and a very special situation to produce such a 
degree of divergence from the typical course of utility that 
added increments of goods shall have an increasing utility, 
though that effect is possible. Nothing less than such in- 
creasing utility could attract the attention of those who 
find no law for the rate of diminution of utility and accept 
without question any downward rate or succession of rates. 



VARIATION OF COMPLEMENTARY UTILITY 109 

The scope of complementary utility, however, is not con- 
fined to its extreme effects, though its tendency to counter- 
act diminishing utility is thus best illustrated. Since homo- 
geneity and correlational or complementary heterogeneity 
may both hold as different aspects for the same collection 
of goods, both laws of variation may be conceived to be 
coincidently applicable. Complementary utility is thus 
manifested as a cause of upward deviation from the regular 
form of the curve of diminishing utility. But this relatively 
upward direction of the curve may still be absolutely 
downward or merely level. The suspension, rather than 
the reversal, of the diminution of utility is what is to be 
expected. 

As compared with the upward variation due to comple- 
mentary utility, diminishing utility may be said to be more 
objective or demonstrable. This may be because the latter 
is favored by the somewhat extraneous fact that there is 
such a thing as physical homogeneity of goods, while the 
peculiar kind of unlikeness required for the complementary 
relation is altogether dependent upon psychical factors. 
Homogeneity may be such only from the point of view of 
the consumer and still occasion the diminution of utility. 
But the evidence for the principle of diminishing utility is 
not mainly of this less convincing sort; while the counter- 
acting influence or opposite course of complementary 
utility always requires attention to something less close to 
the physical. Only in the field of production may we find 
clear and thoroughly objective cases of the complementary 
relation, and here the end and criterion of the interrelation 
is technical, having no direct reference to satisfaction. 
Here also substitution and the instability of groups ob- 
scures the significance of complementary interdependence, 
at least if we have in mind concrete groups instead of the 
interdependent "factors of production." If we have to 
assume a given state of engineering knowledge and un- 
changing relative prices in order to make complementary 



110 WELFARE AS AN ECONOMIC QUANTITY 

relations in production stable, even that is easier than to 
assume as much in the field of consumption and to as- 
sume also a standardized and constant affective valua- 
tion. Physical likeness is a hard and fast fact while com- 
plementariness is a matter of judgment and taste. The 
corresponding principles of the variation of utihty par- 
take of these characteristics. 

There is a better argument for the underlying character 
of the principle of diminishing utility. For an abstract 
kind or element of utility, like time-keeping utility, di- 
minishing utility must hold unqualifiedly. The utihty of 
the normal sitting position — as sharply defined and dis- 
tinguished, not only from standing and reclining, but also 
from various intermediate positions such as may be as- 
sumed in a rocker, Morris, or swivel chair — is more cer- 
tainly subject to diminution than is the utility of the genus 
chair, with its many species. The complementary relation 
and the resulting possibilities of increasing utility, on the 
other hand, require concrete objects or acts; for example, 
the chair and the appropriate occupation of it as to place 
and time. Abstract elements of utihty as such do not ap- 
pear to be complementary to one another. It is at least safe 
to say that they do not get beyond mere contrast effects. 
The complementary or part-utilities of the members 
of a group are only potential until the group is formed. 
The several goods must be combined in order that the com- 
plementary kind of utility may exist. Of course the 
members of the group will have also their independent 
particular utilities. 

Particular utility, furthermore, practically, if not ab- 
solutely, always underlies complementary utility, and for 
particular utility, so far as it can be separated, diminish- 
ing utility holds in all cases where consumption is ration- 
ally ordered. A congeries of goods always has a collective 
particular utility, whether or not it has also complemen- 
tary utihty due to internal relations. 



VARIATION OF COMPLEMENTARY UTILITY 111 

One cause of the obscuration of the effect of the com- 
plementary relation on the variation of utility as applied 
to ordinary concrete groups is the fact that, once a group 
is completed, the utility of added goods may be expected 
to drop rapidly enough to balance the previous retardation 
of decline and to make the effect of the complementary 
relation temporary, or only a "hump" on the curve of 
diminishing utility. This double effect is less of an objec- 
tion than it seems, for these groupings in consumption are 
elastic and multifarious. In practice it is to be expected 
that consumption wiU proceed up to, but not beyond, such 
a sharp drop in utility, and, the one group having been 
completed, some other group will be attended to. Within 
the zone of moderate expenditure there is no end to the 
possibilities of improvement of groups by additions and 
modifications. 

Since complementary utility is always the utility proper 
of some group, it may be said that diminishing utility holds 
for the utility of the successive groups of the same kind, 
and in this way for complementary utihty. The consumer 
is supposed to increase the number of this kind of group 
until its utility, including the complementary part, becomes 
marginal. Doubtless this would hold if the consumption of 
the individual proceeded to the formation of several like 
groups. But the maxim of variety is, "One of a kind is 
enough." The more important groups are, moreover, so 
large as to be almost inclusive of the entire consumption 
of the individual or family. A group is typically a sort of 
department of consumption. Duplication of such a group 
must be exceptional, though it is conceivable for the econ- 
omy of the very rich. Most people have to be content with 
one house and one outfit of furniture. Even where dupli- 
cation is possible, the new group is likely to be more or 
less complementary to the old. A gentleman's country 
home is not so much another unit added to his supply of 
houses as it is a complement of his city house. In general. 



112 WELFARE AS AN ECONOMIC QUANTITY 

one group of a kind suffices. There is no such thing as a 
supply of homogeneous group-units with a marginal group 
for the least important use. 

The principle of diminishing utility applies to comple- 
mentary utility only in the sense that the group richest in 
complementary utihty, other tilings being equal, will be 
formed first, the next richest second, and so on. But this 
amounts to saying that the principle of diminishing utility 
has no practical, and scarcely any theoretical, significance 
for complementary utility, however absolutely it applies, 
of course abstractly, for particular utility. Among other 
things that must be equal are the size of the groups, the 
particular utilities of the parts of the different groups, and 
also the relation between costs and particular utilities. 
These things cannot be presumed to remain the same 
through a series of groups. The situation, furthermore, 
should not be complicated by relations between groups, a 
thing very frequent in actual consumption, so frequent in 
fact that the very supposition of a mere series of groups, as 
opposed to a group of groups, is quite artificial. Therefore 
complementary utility may without qualification be said 
to obey a different law from that of particular utility. 
Only in so far as the group is small enough and fixed enough 
to be thought of in market transactions and recognized in 
the economy of many consumers will there be adjustments 
of the market to take account of complementary utility as 
there are in the case of particular utility. That demand 
and the market will be unaffected by complementary util- 
ity is, however, a different proposition. 

Complementary utihty, as has been stated before, does 
not reside in or adhere to any particular good. This fact 
of itself must defeat the market and marginal conception. 
It is for similar reasons that super-marginal utility is not 
taken account of in the market. 

But, though complementary utility does not diminish 
according to the variation law, it does not follow that it 



VARIATION OF COMPLEMENTARY UTILITY 113 

can go on increasing forever and be unlimited in amount. 
It is limited by capacity to enjoy. While its limit is more 
elastic than that for any other species of utihty, and while 
it is the most genuinely fruitful recourse of pampered and 
jaded sensibilities, the capacity of no individual is equal 
to exploiting all its possibilities, especially as its enjoy- 
ment is so little passive and so largely exigent of active 
attention and systematic interest. Especially for the per- 
son whose time is not mainly leisure time, there is need 
of checking the development of complexity of Ufe in this 
as in other respects. 

Adequate attention to complementary utility, we con- 
clude, requires a decided modification of current concep- 
tions of the character and of the variation of utihty. 
Diminishing utihty, it is true, retains its fundamental 
importance. In the realm of very general (and therefore 
very abstract) principle it counts for more than the comple- 
mentary relation. But, in concrete dealings with goods, 
degree of complementary utility is of quite as much practi- 
cal importance in motivation and choice as is the variation 
of particular utility. Here complementary utility occupies 
the foreground. That its scientific interest has not been 
duly recognized may be attributed to the fact that the 
viewpoint of the economist has usually been that of the 
merchant rather than that of the consumer, and also to 
the fact that the economist is seldom much of a psycholo- 
gist. The complementary relation is so significant for de- 
gree of reahzable utility that it should be given as large a 
place as diminishing utility itself in an adequate discussion 
of consumption and of the variation of utihty. 



CHAPTER X 

IMPUTATION AND TRANSPUTATION OF UTILITY 

Transputed utility has been described above as due to a 
relation of one good to another such that the fuU enjoyment 
of the second is felt to be practically and exigently de- 
pendent upon the control of the first. The transputed 
utility is thus superposed upon other kinds of utility, in- 
cluded among them being complementary utility as ordi- 
narily or equitably attributed to the various members of a 
group. This conception is different from the Austrian con- 
ception of imputation in so far as that does not distinguish 
merely complementary utility from the stronger case. The 
reason for this is doubtless the fact that the Austrians give 
attention to utility only as the foundation of economic 
value and then proceed to study the imputation of value as 
between intermediate goods, where only value and not 
utility, in so far as super-marginal, is significant. In so far 
as economic value is founded upon complementary utility, 
utility, since it is of direct significance in the market, is also 
imputed. Whether we may say that it is also transputed 
would depend upon whether the concentration of value 
upon one or few members of the group would signify any- 
thing of human interest, that is, mainly as regards the 
character and benefits of consumption. The one case where 
such imputation does become transputation is where labor 
gets relatively Uttle of the joint product of all productive 
agents and the material elements get most. But let us first 
consider imputation in the usual way and in its estabUshed 
field. 

The clearest case of the imputation of value is to be seen 
in the apportionment of the commercial value of products 
among the factors of production. The interrelations of the 



TRANSPUTATION OF UTILITY 115 

available supplies of productive agents result in the impu- 
tation of the value jointly produced to the various agents 
in proportion to their relative scarcity. Under the name 
of joint demand, this situation had been described before 
Carl Menger's time, but the Austrian conception is so 
much more adequate as to be entitled to the honors that 
are due to scientific discovery. The problem of distribu- 
tion is a problem of imputation resulting from the divided 
control of means of production. The relative value of com- 
plementary agents thus separately controlled and con- 
stituting conflicting social interests is a very practical 
question. 

The simplest case of imputation in production is that 
where all the means but one are free goods. This is the 
ideally primitive condition, where a man has to consider 
only the cost of his own labor, since his materials are free 
of other costs and his productive efforts are unassisted by 
those of other men. Under such circumstances all the value 
of the product is imputed to labor. But at the present time 
the laborer no longer receives " the whole produce of labor." 
In the countries most advanced in civilization, free goods 
are of decreasing economic importance, and production is 
typically joint-production, involving the efforts of many 
laborers, directive and other. Under such circumstances 
the commercial value of means of production, which is 
imputed value to such an extent that any other value is 
hardly to be distinguished, varies inversely as replace- 
ability. Some kinds of laborers, moreover, are among the 
most easily replaced means of production. The theory of 
rent, both of land and of superior ability, if we may speak of 
the "rent" of ability, is also a corollary of the doctrine of 
imputation. The peculiarity of this part of income from 
property depends upon two facts, that the supply of land is 
relatively fixed, and that the land is relatively irreplace- 
able. So much for imputation in the sphere of commercial 
value. 



116 WELFARE AS AN ECONOMIC QUANTITY 

Menger, Wieser, and Bohm-Bawerk fail to bring over 
these principles of the complementary relation and of im- 
puted value from the sphere of production and sale into 
that of immediate utility. The principles are to be con- 
sidered the outcome of subjective laws of the enjoyment 
and estimation of goods under limiting conditions of abso- 
lute and relative supply. They should therefore find ex- 
pression in the field of consumption. The complementary 
relation has already been shown to be of an importance in 
this field hardly to be overestimated. Imputation, or the 
special case to which the distinctive name transputation 
is here given, is in its peculiar way hardly less significant. 

In the Austrian conception "imputation" (Zurechnung) 
is used to designate the process by which the value of a 
joint product of several factors is apportioned between 
them.^ The contrast between this process and the division 
of a common store between contributors in proportion to 
the physical contributions they have made to it is highly 
significant. The analogy to the judicial imputation of 
guilt in a difficult case when the physical facts relating to a 
misdeed are known is instructively developed by Wieser. ^ 

* According to the etymology of the word, the term "imputation" 
might cover the attribution of utility or value generally, without regard 
to joint effects or the complementary relation. Or it might have the 
sense of injurious or false attribution, for example, the comprehensive 
remedial effects "imputed" to whiskey by the person with a special ap- 
petite for it. Patten (Dynamic Economics, chap, xix, "The Imputation 
of Utility") states various "laws" of imputation (attribution) of utility 
in consumption, — a problem which the present essay no more than 
touches (cf. p. 120). The present writer does not use the term in this broad 
sense but supposes that imputation is not only a phenomenon of the com- 
plementary relation but also implies a definite result such as is obtained in 
the field of economic value and distribution. Hence utility in his view is 
imputed only when it becomes quantitatively definite as economic value. 
This is entirely in accord with Austrian usage. 

On p. 121 of Dynamic Economics it appears that Professor Patten con- 
siders as imputed only the complementary utility of a group over and 
above the particular utility of the individual units. The theory of trans- 
putation has the same starting point. 

2 Natural Value (translation), 1893, book in, part i, chap. ii. Simi- 
larly in his Ursprung und Uauptgesetze des wirtschaftlichen Werthes. 
1884., p. 172. 



TRAKSPUTATION OF UTILITY 117 

Imputation is essentially a mental operation, a phase of 
the judgment of value. But it should be noted that the 
attribution of utility to an object or collection of objects is 
just as much a judgment of value as is the offer to pay a 
definite money price in exchange for it. In other words, 
value in its broadest sense is a genus of which utility is a 
species. When imputation is said to be a phase of the judg- 
ment of value, there is a presumption that it has signifi- 
cance for utility and consumption as well as for economic 
production and distribution. But the peculiarities of the 
conception in this newer apphcation make it advisable to 
use a somewhat different term, that is, "transputation."^ 

The current idea of imputation in distribution assumes 
that all value to be divided among productive agents is 
imputed to one or another of them, and thus all may be 
called imputed value. This is different from our concep- 
tion of transputation in consumption, according to which 
only some portion of the complementary utility of a group 
may ordinarily be transputed to one member. In consump- 
tion it is not true that all the complementary utility of a 
group is imputed to one or more of its several members, 
nor that the good favored has only the utility that it 
derives from imputation. But the current conception of 
imputation in distribution and the writer's use of the idea 
of transputation in consumption differ from each other 
mainly in that the whence and not merely the whither of 
the utility in question is taken into consideration in the 
second case. 

Under modern conditions of production, which require 
complicated processes and implements and highly devel- 
oped skill, it is clear that the value of an instrument (or of 
a laborer) apart from complements would be practically 
nil. Hence all the utility or value of productive agents may 
be considered imputed. Many consumption goods, how- 
ever, can be put to some use with only free goods as com- 
* Defined and discussed on p. 14. 



118 WELFARE AS AN ECONOMIC QUANTITY 

plements, or even with no complements at all. The apple 
and other fruits are often eaten as they come from the tree. 
The majority of consumption goods can be enjoyed, though 
to less advantage, without the help of other goods. But 
the individual or "particular" utility of a productive agent 
is approximately zero. On the other hand, super-marginal 
utility of any sort, including unimputed complementary 
utility, has little or no significance in the field of interme- 
diate goods. Here value is a sufficient measure of utility. 
The initial utility of such goods might be much greater 
than their actual marginal utility. But the relatively lib- 
eral supply causes a reduction of prices for the correspond- 
ing final goods such that whatever high degree of utility 
they may have for their consumers is not reflected through 
the market to the intermediate goods. Whether it might 
not still be traced from a more general and social view- 
point we will not undertake to consider. It makes no dif- 
ference as regards the value of productive agents whether 
some of their products achieve a high or a low degree of 
realized utility. For the individual consumer, on the con- 
trary, it does make a difference whether he can realize 
much or little utility from what he acquires, regardless of 
the fact that he will pay as low a price as the market will 
permit. Thus imputation operates somewhat differently in 
consumption from the way it does in production, or per- 
haps we should say that imputation has no such compre- 
hensive scope in consumption as in production and that, 
within its sphere of influence, it acquires new interest as 
usually constituting transputed utility. 

The distinction between transputed utility and utility 
proper is worthy of further emphasis at this point. Utility 
proper is due to the intrinsic qualities of a good (or of a 
group of goods), of course with reference also to its own 
supply. But the utility proper of an individual good is not 
practically dependent upon any relation, quantitative or 
other, to objects of different kind, or to the qualities or the 



TRANSPUTATION OF UTILITY 119 

supplies of such objects.^ Transputed utility, on the other 
hand, derives its being from a relation to other goods. It is 
thus hardly to be considered utility in the full sense, or 
rather it is not utility rightfully belonging to the good to 
which it adheres. It is a transferred utility. It is taken 
from the utility of other goods and added to that of the 
good favored by transputation. The utility of the group is 
of course determined by the principles that govern the 
utility of any complete good. 

The transputed utility of a complement is part of the 
proper utility of a complete good or group. This is also the 
case, perhaps in a higher degree, with the merely comple- 
mentary utility of such an article. Merely complementary 
utility may ^be apportioned among the members of the 
group, but, unless it becomes transputed and ceases to be 
merely complementary, it is not so apportioned as to give 
to any of them a firm hold on a definite share of the pe- 
culiarly group utility, or, so to speak, a proprietary right 
in it. Transputation, on the other hand, shunts off to one 
member of the group more than its proportion of the joint 
utility. The utility so shunted expresses itself in a defi- 
nite value and may pertain to the favored article for 
some time, as in a state of equilibrium. The distribution 
of merely complementary utility is as indefinite as is the 
sense of proportion. In considering the utility of a given 
article, however, the distinction between the merely com- 
plementary and the transputed portion may be more defi- 
nite. Doubtless this sense of proportion will be somewhat 
guided by the importance of the complement for other 
uses, especially familiar isolated or independent uses. The 
difficulty of drawing a sharp division line between trans- 
puted and merely complementary utility does not make 
the distinction less important. The reader may, if he will, 
consider them two aspects of the same thing. 

Transputed utility may be described as monopolized 

1 Cf. pp. 12-13. 



120 WELFARE AS AN ECONOMIC QUANTITY 

complementary utility. But this is not the best way of 
characterizing what happens to the surplus above par- 
ticular utility in cases of transputation. Although it is true 
there are various degrees of monopolization, still we should 
not be inclined to call by that name a small disturbance 
of the balance between different claimants to complemen- 
tary utility. Transputation seems to be the more accu- 
rate, as well as the more distinctive, term. 

This brings us to the question as to how to determine 
what is a balanced and what an unbalanced attribution of 
complementary utility among the claimants to a share. 
The author is doubtful whether particular utility outside 
complementary groups affords a satisfactory criterion, 
even conceptually, and this is certainly not a good work- 
ing solution. There remains the possibility of a physical 
criterion. But no definite and hard and fast criterion is 
indispensable where the whole matter hinges upon the 
sense of proportion. Moreover, to develop in this connec- 
tion a scale of physical qualities with reference to the degree 
of their realization due to complementary groupings is not 
to be thought of. Tables of the nutritive values of foods 
are suggestive. But they should be supplemented by tables 
of tastiness. The inadequacy of the present schedules and 
the difficulties of the problem are indicated by the fact 
that such tables assign no value to water. Certainly the 
proportion of water must have a good deal to do with ease 
of digestion and assimilation, and thus with the nutriment 
utilized. The tables in fact do not rise to the plane of the 
complementary conception, and their theory does seem to 
be influenced by the less adequate practice of imputation. 
The water, of course, may be obtained in some other form 
freely and practically gratuitously, while the "nutritive" 
elements have to be paid for. 

Transputed utility, unlike utility proper, is always and 
entirely equaled or matched by economic value. It is 
always a "least possible" or grudging utility, that is, a 



TKANSPUTATION OF UTILITY 121 

marginal utility. This is only another way of saying that it 
is always economic value. It may as far exceed the actual 
contribution to enjoyment made by the object which pos- 
sesses the transputed utility as the market value of neces- 
saries may exceed their contribution to satisfaction when 
their price is forced up under untoward conditions. Trans- 
puted utility is complementary utility that has become 
value. But transputation is, as regards the particular arti- 
cle favored, transputation of value first and of utility sec- 
ondarily. Imputed utility follows in the wake of value, 
while value usually follows utility. 

A superabundant good first acquires value by reason of 
its becoming scarce relatively to the demand for it. Greater 
scarcity means greater value, still with reference to its 
foundation in utility proper to the good. Then if it is 
much combined with other goods, and if its supply is 
smaller than the supply of these other goods, it may come 
to have an accession of value transputed to it by reason of 
its strategic position as compared with its complements. 
There is a great difference between the effect of transputa- 
tion upon the course of the value of a particular good, and 
the ordinary effect of decreasing the supply. In the latter 
case the curve of diminishing utility is simply retraced up- 
wards, or rather uncovered, and its form remains regular. 
Transputation, however, distorts it by a sudden steepen- 
ing of its upper portion until it becomes almost vertical. 
Or, if transputed value is destroyed by an increase of 
supply, the diminution of utility is very abrupt until an 
equilibrium with the supplies of other needed goods is 
attained. 

The distinction between transputed value or utility and 
a high degree of utility and value not due to transputation 
hinges upon the difference between the two sorts of scarcity 
connected with the two cases. Scarcity in some sense and 
in varying degree is the basis of all economic value. It is 
scarcity which makes goods technically "economic," as 



122 WELFARE AS AN ECONOMIC QUANTITY 

opposed to "free" goods. But in the case of the reversing 
of simple diminishing utility through the diminution of the 
supply, the scarcity is — aside from the relation to wants 
— absolute. It would ordinarily be expressed by indicating 
the supply of the goods in absolute numbers compared with 
the need or effective demand, the latter being either tacitly 
understood, or likewise expressed in absolute numbers. 
Scarcity involving transputation, on the other hand, is 
relative, even apart from that relation to human wants 
which is the essence of all utility. There is here a relation 
between the supply of the good whose value is increased by 
transputation and the supplies of the other goods which are 
its complements. This relation is best expressed in terms of 
proportion. It is this relative, or doubly relative, scarcity 
resulting in transputation that gives, or rather superadds, 
a distinctive characteristic to the curve of diminishing util- 
ity. As already stated, it steepens the curve at its higher 
portion and increases the apparent area of super-marginal 
utility wherever its influence is felt. Its influence is felt 
wherever supply is, relatively to the supplies of associated 
goods, scanty or decreasing instead of abundant or in- 
creasing. 

Transputation has so far been considered mainly from 
the side of the good upon whose presence the completion of 
the group is dependent, that is, with reference to the accre- 
tion of a surplus, or a transputed, utility to a recipient 
good. But there is another side to the process. The utili- 
zation of a particular good which is available in abundance 
and whose intrinsic qualities seem to entitle it to high 
estimation may fail because necessary complements are 
unobtainable. It will then have no value. Desert soils are 
frequently of great natural fertility, but they are not val- 
ued until a well or other source of water is available. If 
the needed complements are obtained, the value of the 
group is imputed to them — transputed we should say if 
the emphasis were on immediate utility — until scarcity or 



TRANSPUTATION OF UTILITY 123 

cost gives value also to the good previously superabund- 
ant. A member of a group may be said to have utility trans- 
puted away from it when its peculiar fitness for this group 
relation is, on account of its abundance, unrecognized or 
inadequately recognized in terms of value. Knowledge of 
how to utilize the good effectively may, in a broad sense, 
be the wanting complement. 

The cheapening or improvement of other goods that can 
be applied to uses in conjunction with the commodity in 
question tends to increase its value, that is, to favor trans- 
putation of utility to it. Cotton has probably no less mul- 
tifarious and important uses than rubber. But, in their 
complementary groupings, value is largely imputed to 
rubber, while it is probably imputed away from cotton be- 
cause of the relative abundance of the latter. Many things 
of daily use have their value enhanced by the cheapness of 
cotton, while the use of other things is hampered by the 
expensiveness of rubber, hard and soft, as it enters into the 
construction of mechanical contrivances, toilet articles, 
etc., of various sorts. Utility is transputed away from salt, 
while it is doubtless transputed to some of the rarer fla- 
vors, for example, the flower essences used in confection- 
ery. A broader view, however, emancipating itself from 
the fetich of the market-place, will recognize the great 
complementary utility of salt — a complementary utility 
of which it should not be in thought dispossessed merely 
because, in uses of which the average man has no direct 
experience, its marginal utility is very low. 

Because of the possibilities of imputation of value and 
transputation of utility to or from a good whose utility is 
chiefly complementary, more than usual elasticity of supply 
is necessary to maintain an approximately steady and con- 
stant value for such a good. This fact is especially interest- 
ing in its relation to the value of the agents of production, 
with which, however, we are not here directly concerned. 
Ease of substitution, or the easy finding of equivalents. 



124 WELFARE AS AN ECONOMIC QUANTITY 

amounts to the same thing as elasticity of supply. The 
same elasticity which keeps the value of a merely comple- 
mentary good steady tends also to keep it low. Since there 
appears to be no reason why such goods should in general 
have a specially elastic supply as compared with other 
goods, a given change in the amount of the demand for a 
merely complementary good may be expected to produce 
a greater change in value than is the case with a similar 
change in the demand for a complete or self-contained 
good. A good of the first description may gain much by a 
comparatively slight relative scarcity, but it may quickly 
lose as much by a change of conditions in the opposite 
direction. 

The value of complements, in so far as it is involved in 
transputation, will thus generally be rather unstable. High 
valuation stimulates substitution, and a comparatively 
slight impairment of the monopoly of a complement may 
take away most of its transputed utility. The instability 
and insecurity of the value of a complement are ordinarily 
proportionate to the degree in which its utility is due to 
transputation. Only in exceptional cases, where the in- 
crease of its supply is peculiarly difficult and where its 
usefulness is so fundamental or so unique as to place it 
beyond reach of competition through substitution, will a 
high degree of transputed utility be stable. Secure it can 
scarcely ever be said to be. 

The limitations upon imputation and transputation — 
which do not limit complementary utility — are replace- 
ment and substitution. They are usually very effective. 
They are, however, much more effective for a narrow 
species of goods than for broad classes. Necessaries as a 
class are quite irreplaceable. 



CHAPTER XI 

THE TRANSPUTED CHARACTER OF THE INITIAL UTILITY 
OF NECESSARIES 

Transputation is especially important in relation to the 
theory of the utihty of necessaries. Necessaries, it is said, 
being the means of preserving life, may, under conceivable 
circumstances, have a value equal to that of life itself, and 
therefore infinitely or indefinitely large. On the side of 
economic valuation it is perhaps a tenable proposition that 
necessaries may be worth the full value of life. And that is 
indefinitely large, though not infinite. Does this value, 
then, always suppose utility, and a utility at least equal 
in magnitude to that of the value? For some purposes the 
answer is aflSrmative: The utility of necessaries is equal to 
their value. But even without such warning as is contained 
in the foregoing discussion of transputed utility, one must 
feel that the utility involved is not quite the same in its 
nature as that utility which is the source of man's ordinary 
enjoyments. Utility is ordinarily and rightly thought to be 
proportionate to satisfaction. The supposedly supreme 
degree of utility of necessaries to a person in straits, for ex- 
ample, the degree of utility of food to a starving man, calls 
for critical examination. 

As a matter of logic, in the first place, it is not true that 
one of a number of necessary means to an end must be 
valued as highly as the end itself, though something like 
this is true of all the necessary means combined. These nec- 
essary means are complements of one another. If alongside 
the chief means any of the other factors can establish a 
claim to consideration and to value, there is just so much 
less left to be attributed or imputed to that which is felt to 
be the great precondition to the end. 



126 WELFARE AS AN ECONOMIC QUANTITY 

It is not sound to argue that because without life one 
cannot have what Hfe contains, therefore the importance 
of hfe must exceed that of its contents. What gives this 
argument speciousness is the fact that hfe is worth more 
than any one of the elements of which it consists. But this 
proposition is true only on the assumption that there re- 
main other elements that are worth something. Life is at 
most worth only what it contains, or, strictly speaking, 
something less than what it contains, since the process 
of imputation itself costs something. Existence in the 
abstract is mere potentiality. It is empty space, or rather 
empty time. It is merely room for something else. Life 
is abstract opportunity, but its value depends upon what 
constitutes its concrete offerings. Not mere life itself, but 
the good content of life, is what is desirable and desired. 
Life itself has no value except as means to an end. The 
mere means to life are therefore still more remote in the 
chain of values and their value is entirely contingent. 

The value transputed to the means of preserving and 
sustaining life, that is, such part of their value as is not pro- 
portionate to the amount of satisfaction directly obtained 
from such goods, is subtracted from the value of other 
things that life can give. The great value attributed to the 
necessaries of life in situations of extreme exigency is trans- 
puted value and transputed utility, not utility proper.^ But 
of course transputed utility is just as good a basis for mere 
economic or exchange value as is utility proper. Hence 
the great possibilities of a rise in price for necessaries, for 
example, in a besieged city. But from the point of view of 
consumption and enjoyment, the situation as regards the 
satisfaction obtainable, and the real utility, are very differ- 

^ Cf. Professor Patten's conception of "absolute" utility {Dynamic 
Economics, p. 40), which is parallel to, yet curiously different from, the 
idea developed here. The viewpoint of the text is more nearly antici- 
pated by Johnson, Rent in Modern Economic Theory, 1902, footnote 
on pp. 12-13, where credit is also given to Hobson, Economics of Distri- 
bution. 



THE INITIAL UTILITY OF NECESSARIES 127 

ent. Not all utility can logically be transputed to food, 
since not all other utilities are free, or without economic 
value. A man may rationally give all he possesses for food 
to save his life because of what the future means to him in 
the way of opportunity to create and enjoy other utilities. 
But if he were to forego all future utilities for the sake of 
barely preserving life, he would not be acting rationally 
and economically, though he might be impelled to such 
action by an instinct that was not created to cope with 
any such situation. No man could rationally sell himself 
into unmitigated and hopeless slavery. 

The transputation of utility to necessaries is instinctive, 
and the effect upon feeling of the means of preserving life 
may therefore often be immediate and intense. Instinc- 
tive appetite may cause the transputed utility of necessaries 
to be experienced as a very great immediate utility. But, 
though the process of transputation is instinctive, the 
degree of value attained by necessaries under unusual cir- 
cumstances is much in excess even of a possibly enhanced 
immediate utility due to heightened appetite. Extreme 
exigency, in fact, is likely to impair the possibility of imme- 
diate enjoyment. It is moderate hunger that is "the best 
sauce." Moreover, if a person's circumstances are chroni- 
cally or permanently straitened, the borrowed utility also, 
that is, the utility instinctively transputed to necessaries, 
is, as we have seen, not rationally transputed. The direct 
individual contribution to happiness made by mere nec- 
essaries may be negligible. Their utility proper may be 
next to nothing. 

The relative importance of different portions of an in- 
dividual's income, as well as of different magnitudes of in- 
come, should be considered in the light of the principle of 
the transputation of utility to necessaries. There is a par- 
ticular portion of income which may be distinguished as 
more especially devoted to utilities proper. This is the 
portion just above what is required for necessaries, a stage 



128 WELFARE AS AN ECONOMIC QUANTITY 

beyond which the income of many individuals does not 
reach. We may call this free or super-minimal income, 
either of which terms is self-explanatory. This is the shift- 
able or disposable portion of income above the necessary 
provision for bare subsistence. Luxury in certain forms is 
the most developed phase of free income or free expendi- 
ture. But the demand for comforts exhibits more clearly 
the tendencies of ordinary free income, unmixed, on the 
one hand, with transputed elements of utility, and, on the 
other, with adventitious elements. The character of the 
distinction between free and minimal or necessary expen- 
diture is also suggested by the division of wants into exis- 
tence wants and culture wants, with the implication that 
the latter have greater intrinsic significance. 

Without free income all utility tends to be swallowed up 
by transputation to necessaries. Hence utility proper has 
little scope except where there is enough income to include 
some free income. For this reason a man clings obstinately, 
as should be expected, to certain "indulgences," even at 
the cost of not obtaining some necessaries and of thus im- 
pairing health. Man seeks ultimately only satisfaction, or 
the things that give satisfaction. He does not want mere 
life, but the good of life. A man will often sacrifice in some 
degree the means of subsistence to mere sources of excite- 
ment and pleasure. The whole series of so-called stimu- 
lants, from tea, coffee, and cocoa to malt drinks, wine, and 
spirits, in their various forms, belong in this class of utili- 
ties. These direct nerve-stimulants are especially subject 
to abuse by the very poor, who usually have relatively 
small resources, mentally as well as economically, for the 
finding and utilization of more durably fruitful methods of 
applying super-minimal income. 

It is not always super-minimal income that is used for 
stimulants and excitants. As a cynic might say, a man can 
do very well without some of the necessaries of life, but 
he has "got to have" a few luxuries. This philosophy is 



THE INITIAL UTILITY OF NECESSARIES 129 

neither unknown among the masses, nor unuttered. For 
such reasons the curve of demand for tobacco and that for 
alcohoHcs have the steepness indicative of an inelasticity 
which some economists have supposed characterized exclu- 
sively the demand for necessaries.^ Cattle, sheep, and 
swine, and also some human beings, are doubtless in their 
best state of "mind" when living a merely vegetative ex- 
istence. If they have enough to eat, are mildly treated, 
and are induced to take exercise or labor hardly more than 
enough to keep their digestion in good shape, they are 
doubtless happy, perhaps almost "as happy as a clam." 
But they are not living a human life. For a human exist- 
ence and for human welfare, free income is more impor- 
tant, though not more fundamental, than the necessaries 
of life. One cannot build a house without first laying 
foundations; but the foundations derive all their impor- 
tance from the structure raised upon them. 

The gist of the matter is that transputed utility should 
not, strictly speaking, be called utility. In case of the 
transputation of utility to necessaries, it is measured, not 
by what is positively contributed to consumption or enjoy- 
ment, but by negative or destructive power over the health 
and life which are the foundation of all enjoyment. What 
is the true utility of food to those to whom it merely con- 
tinues an existence which yields nothing but privations? 
And what would be the rate of diminution of real utility, 
supposing the capacity of such people for feeling remained 
unimpaired, if they were given first enough of the neces- 
saries, and then some of the comforts of life? For normally 
constituted human beings, as distinguished from such as 
live in a stage of brute instinct and appetite, no diminution 
of utihty results from an increase of goods which provides 

^ Cournot, in Mathematical Principles of the Theory of Wealth (transla- 
tion), p. 46, definitely associates the most superfluous and the most nec- 
essary goods as regards the character of their demand curves. But he 
relates the former to ideas of adventitious utility. 



130 WELFARE AS AN ECONOlVnC QUANTITY 

comforts where before were merely necessaries. It is only 
free income that affords any considerable means of enjoy- 
ment. In other words, it is only free income that has real 
utility. 



CHAPTER XII 

CONTRASTED SIGNIFICANCE OF MERELY COMPLE- 
MENTARY UTILITY AND TRANSPUTED UTILITY 

So far we have not made an issue of the relation between 
complementary utility and transputed utility. The differ- 
ence between their relations to welfare has only been inci- 
dentally suggested. It may seem that complementary utility 
is of importance only when transputed. But it is only for 
the market that this is true. In the larger view, and in 
the field of consumption, there is a striking contrast be- 
tween merely complementary utility and transputed utility. 
In merely complementary utility the peculiar group 
utility is vaguely, if at all, apportioned, or apportioned 
without discrimination, among the members of the group. 
Transputed utility, on the other hand, is definitely and 
forcibly assigned to particular members as economic value. 
Only on such terms is the article that is favored by trans- 
putation to be obtained. In order that all complementary 
utility might be transputed and become value as well as 
utility, while remaining evenly apportioned throughout 
the group, it would be necessary that each and all of the 
supplies of the different members of a group should be so 
adjusted that the marginal utility of each member would 
absorb the complementary utility in proportion to its part 
in the group. The supphes must be neither too great nor 
too small to meet these requirements, and this adjust- 
ment must be stable. The coincident and enduring realiza- 
tion of all these conditions is inconceivable. Hence the 
complementary utility may be assumed to be always in 
excess of the transputed utility based upon a particular 
group relation. In other words, not all complementary 
utiHty can be transputed or imputed as commercial value. 



132 WELFARE AS AN ECONOMIC QUANTITY 

Merely complementary utility has little relation to the 
market, although it has much importance in a well-man- 
aged private economy. The marginal utility or value of an 
important article of food is likely to be determined chiefly 
by some relatively unimportant noncomplementary use, 
as for example in the case of salt. The utility of a pinch of 
salt, though it is not wanted by itself, is out of all pro- 
portion to its cost. Bread, also, because of its complement- 
ary utility, contributes much more to enjoyment than, in 
proportion, to its commercial value. Potatoes alone, at 
least the typical ripe, mealy, and rather tasteless kind, 
would be very unsatisfactory food, yet for many no im- 
portant meal is quite complete without them. But their 
commercial value is proportioned rather to their particular 
(marginal) than to their complementary utility. The en- 
joyment obtained by well-chosen combinations of such 
articles is therefore in general "clear gain." The comple- 
mentary utility is super-marginal. 

Complementary relations are flexible and adjustable. 
The elasticity of demand is largely due to this fact. This 
flexibility of complementary relations is the great means of 
preventing the imputation or transputation of the result- 
ing utility and the making of it marginal. If the quanti- 
tative relations within the group can be adjusted to the 
conditions of supply, or if new components may be intro- 
duced — supposing either alternative costs less sacrifice of 
super-marginal utility than results from transputing it as 
economic value to the relatively scarce articles — such an 
alternative to transputation will be adopted, at least in so 
far as habit and inertia can be overcome by intelligence. 
Thus the super-marginal character of complementary 
utility will be in large degree preserved. Some slight super- 
marginal utiHty is sacrificed — through the less perfect 
fitness of the substitute — in order to prevent a greater 
sacrifice by way of transputation. 

On account of the flexibility of the complementary re- 



TRANSPUTED AND COMPLEMENTARY UTILITY 133 

lation, the measurement of the utihty of a complement by 
means of relative replaeeability, or by the loss incurred in 
going without it, is appropriate only in the field of produc- 
tion, where imputed value is the significant phase of the 
complementary relation. The limit of the commercial 
value of a complement is the difference between the value 
of the complete group and its value without the particular 
complement. The value of the group less the complement 
in question will depend upon the cost of a substitute, both 
in direct outlay and in inferior suitabihty. But these are 
all matters of marginal utihty and market value. Utihty, 
however, is more than marginal utility; and especially 
complementary utility is more than economic value, or 
rather quite different from it, tending even to escape com- 
mercial reckoning altogether. Complementary utihty is 
proportional to contribution to satisfaction over and above 
the contribution of particular utility. Complementary 
utility thus depends upon suitableness only and not upon 
indispensableness. Replacement and substitution do not 
merely check transputation, they defeat commercial meas- 
urement of complementary utility. 

The view that super-marginal utility does not affect and 
is not affected by marginal or market utility is subject to 
qualification. The amount of complementary utility, it is 
true, has no relation to the marginal utility of the goods 
involved, except in the case of the commercial grouping and 
sale of the complete good — which is more conceivable 
than practicable — and, for the rest, only in so far as the 
complementary utihty becomes in part marginal utility 
by transputation. But, at least from a dynamic point of 
view, the amount of complementary super-marginal utility 
does affect indirectly the amount of goods demanded and 
hence their marginal utility. 

As it is true that in general the economic rent of land 
does not produce high prices for raw produce but is the 
effect of high prices, so a large amount of super-marginal 



134 WELFARE AS AN ECONOMIC QUANTITY 

utility is in general an effect of the lower prices of articles 
of consumption. But in the case of land, its use for house 
plots and lawns makes it less possible to use it for the rais- 
ing of wheat, hence the rent of wheat lands must be higher 
than it would be if wheat did not have to compete with 
other uses for the land. In order that the area of wheat 
land may be large enough, other and presumably some- 
what inferior acreage must be resorted to, whereas, if land 
were used for wheat cultivation only, the area actually 
devoted to homes might have served the purpose better. 
The high degree of utility of land for the latter purpose, 
therefore, does affect the demand for land. Since degree 
of utility and extent of demand go together, the greater 
the excess of this utility above that of wheat growing, the 
more land a given use will take away from the wheat 
fields. Thus a different and higher marginal utility will 
be established because of the intense use. 

Similarly, the kinds of utility of higher degree are an 
important factor in demand. If all uses are assumed to be 
constant and unchanging — as they may be for the pur- 
poses of an illustration requiring static conditions of de- 
mand — only actual uses of land near the margin need be 
considered. The influence of uses of higher degree is in a 
sense a phase of the dynamics of demand. But it is per- 
haps just in these regions of high utility that new develop- 
ments are most likely. The leadership of consumption 
lies with those having much free income who are thus able 
to experiment with new combinations of goods. Subjec- 
tive conditions favoring the development of complemen- 
tary utilities in consumption cause an increased demand for 
the articles which permit this exploitation and thus tend 
to increase their economic value. Perhaps a strictly static 
view would not need to take account of this effect, but 
in fact the complementary relation is in its very nature 
flexible, variable, and dynamic. Complementary utility 
and super-marginal utility are shifting quantities. Their 



TRANSPUTED AND COMPLEMENTARY UTILITY 135 

amount and its fluctuation must affect the amount of 
demand. Complementary utility therefore indirectly 
affects value or marginal utility. 

It is a defect in the exposition of the marginal-utility 
theory of value that it fails to notice that the determining 
effect of the marginal increments of consumption, which 
are relatively poor in utihty, is what it is because the rest 
of the supply and demand are what they are, and that the 
demand would not reach the amount assumed without the 
more fruitful as well as the marginal uses. The more im- 
portant uses are assumed to be fixed and certain and the 
marginal to be variable and doubtful, and of course the vari- 
able uses are the critical point. Likewise it is the common 
man's assumption that price is fixed in the large markets, 
or by large dealers, and merely echoed by the small. In 
fact, the large transactions are of decisive importance only 
in proportion to their size, and they indicate the normal 
price better only because of their greater sensitiveness to 
changes in supply. Similarly the margin of utility is where 
it is because of the amount of the entire utility and the 
volume of the entire demand. Marginal utihty is therefore 
in part determined, though indirectly, by the need for the 
goods in groups and uses that are certain of their effect 
just because highly productive of super-marginal utility. 
Most of the uses to which important articles of consump- 
tion are put, especially the more durable articles, have con- 
siderable super-marginal utility. In perhaps the majority 
of private economies in which such articles are used, a sole, 
and therefore a marginal, unit will yield a utility much 
above the merely marginal utility. But the demand for 
such articles is the most sure of all. At the same time the 
relation of their utility to value, as degree of market value 
or marginal utility, is somewhat remote. As regards an 
article of this nature, such reference to marginal utility as 
may enter the mind of the consumer will serve chiefly the 
purpose of aiding him to form a notion of the amount of 



136 WELFARE AS AN ECONOMIC QUANTITY 

super-marginal utility or consumer's rent he Is to receive. 
If there are several units of the same supply definitely 
needed within a particular private economy, even the last 
to be obtained may have appreciably more than marginal 
utility. The surplus or super-marginal utility, which is 
likely to consist of complementary utility, will be a factor 
in determining the purchase. If fixity of degree of utility 
for each use could be granted as a postulate of the theory 
of diminishing utility and marginal utility, the application 
of quasi-mathematical conceptions of marginal utility and 
value would be less obstructed by complementary utility 
and super-marginal utility, which are admittedly contin- 
gent. Actually there Is often much leeway, though variable 
in amount, between marginal enjoyment and reasonably ex- 
pected enjoyment or utility. So far from being the rule. It 
is rather an unusual coincidence when the utility of an 
article to Its owner conforms to that of the price paid 
for It. 

Complementary utility is either transputed to a few 
articles as economic value, or else it is super-marginal. Its 
tendency in the field of consumption is to avoid transputa- 
tion. Consumption groupings, too, are varied and elastic, 
and the possibilities of substitution are correspondingly 
greater for a missing group member than for an Isolated 
unit of supply. When there Is no necessity for transputa- 
tion, the utility resulting from exploitation of commodities 
in groups is one of the greatest sources of super-marginal 
utility or "consumer's rent." Grouping as pursued con- 
sciously and In the concrete is mainly a free activity, and 
the psychical income thus obtained is not subject to a mar- 
ket countercharge. Nor is It usually shunted from the 
group as a whole to some one or few members. The com- 
plementary relation always implies potentiality of transpu- 
tation, but is more significant for happiness, though less 
significant for exchange, when transputation is unnecessary 
and unthought of. Transputation, or rather imputation — 



TRANSPUTED AND COMPLEMENTARY UTILITY 137 

since nobody is interested in indirect goods except as 
means and without distinction of ultimate uses — is the 
rule in production, or at any rate the significant situation. 
The opposite is true in consumption. Here complementary 
utility not only tends to escape transputation, but is in- 
trinsically of greater significance when it is unimputed, or 
not directly reflected in market value. ^ 

It may be alleged that complementary utility is just as 
much subject to marginal judgment and valuation as the 
utility of any congeries of goods, for, though the comple- 
ment is a member of a group instead of a unit of a homo- 
geneous supply, it may be said that the group is itself a 
unit of a supply of such groups which will be increased in 
number up to the marginal point, and then each group 
will be valued only as the marginal one is valued. This 
would all be very true for economic value provided the 
premises of the argument held, and doubtless some per- 
sons are not able to separate their judgment of utility 
from their judgment of value (in the narrower economic 
sense) without the aid of such circumstances as turn utility 
into value. But the premises do not hold, and the separa- 
tion of the judgment of utility from that of economic value 
is specially facilitated in the case of complementary utility. 
Where the usual if not the typical situation is that of a 
consumer needing but one unit of one kind of good, and 
not a supply in the sense that implies plurality, he may 
very well find a striking disproportion between the utility 
of the good to him and the price, or the utility of the price, 
he pays for it. An amateur musician's piano or a boy's 
fishing tackle have degrees of utility which their respec- 
tive prices seldom even faintly express. It is particularly 
a complement, and the large group to which it belongs, 

1 Professor Patten, though without reference in this connection to 
complementary utility, emphasizes the importance of keeping a large 
part of utility super-marginal through competitive substitution of one 
good for another in consumption to take advantage of differences in price. 
See Theory of Prosperity, 1902, especially pp. 61 and 82. 



138 WELFARE AS AN ECONOMIC QUANTITY 

that is likely to be wanted but once. The group will not 
bear repetition. It often bulks so large that one group is 
enough for the particular economy. Its utility may be any- 
where above the margin. Here marginal utility is not 
nearly so important as utility, especially complementary 
utility. Neither household furniture, nor clothing, nor 
even food when considered in relation to immediate need, 
are to the consumer a homogeneous supply. Each is a re- 
lated group of unlike goods. Moreover, each article of a 
group is for the most part unique in the economy of the in- 
dividual consumer, and that too by preference. The util- 
ity of such a unique good can have any sort of relation 
to marginal utility, and the difference between marginal 
and entire utility will be clear. It is a monstrous mistake 
to suppose that marginal utility is the only utility. Indeed 
it is often necessary, tacitly or explicitly, to consider the 
needs of society at large in order to give the homogeneous 
supply and the marginal principle the chance they deserve 
to have. 

In the case of food and of economically perishable goods, 
the situation is not quite the same as for durable goods, 
which may be called the "fixed capital" of consumption. 
There is a flux and recurrence of processive need which 
must be met by a flow of goods, and thus the unit that fully 
meets the need of to-day, so that no second unit is now 
required, will disappear and make room for a unit of the 
same sort to-morrow to meet the recurrence of the same 
need. Every careful student of economics appreciates how 
unsatisfactorily the ordinary conception of a supply of 
goods — that is, a given number or a number varying with 
the price per unit — works out in connection with such 
utilities in illustrating diminishing utility and marginal 
utility. But we can apply the conception of diminution of 
utility to the volume of a flow as well as to the amount of a 
fund. A supply of one a day, whether units can be held 
over from previous days or not, would, supposing the need 



TRANSPUTED AND COMPLEMENTARY UTILITY 139 

is also for one a day, afford only the unique good whose 
utility may be expected to be greater than marginal. 

Some utilities do not merely tend to escape imputation 
and transputation; they are unimputable. Nobody can 
confine and market a beautiful natural environment, a 
blue sky, or a view of sea or mountain. The value of forest- 
clad hills as a regulator of drainage and climatic conditions 
cannot be imputed to this or that tree or wood-lot and be 
bought or sold with it. Such things will not bear dissection 
and sale piecemeal. They are none the less economically, 
though not commercially, valuable. They are valuable to 
the community, though they are nobody's individual 
asset. They contribute to the value of land, but their con- 
tribution cannot be separately appropriated or individ- 
ually administered. Perhaps commercial honesty and the 
cleanhness and orderliness of a people are values in the 
same category, but they are not so clearly economic goods 
as is the forest. 

It is perhaps because of the generally free and unimputed 
character of group utility in consumption that it has re- 
ceived little or no attention from economists.^ Unless 
necessaries are encroached upon, consumption may largely 
avoid imputation, which makes economic value out of 
complementary utility, and transputation, which involves 
this and also the disproportionate distribution of both 
the complementary utility and the corresponding value. 
Though merely complementary utility and transputed util- 
ity are cognate conceptions, their phenomena being results 
of the same general situation, one is the bright side and the 
other the darker side of consumption. It is too often for- 
gotten that economic value itself is, from the social point of 
view, not a thing to be desired, but it is rather a measure 
of the power of environment over man. Perhaps for the 
individual also the possession of things having much eco- 

^ With the conspicuous exception of Professor Patten, Consum.'ption of 
Wealth (1889), and Theory oj Dynamic Economics (1892). 



140 WELFARE AS AN ECONOMIC QUANTITY 

nomic value is a measure of his power over his fellows. 
When both terms of this relation are duly considered, the 
sum is seen to be zero. Transputed utility is like all value 
in being a measure of the power of circumstances and of 
commercial strategy. Utility, on the other hand, is directly 
worthy of desire, and complementary utiUty is the species 
of utility the least likely to be subjected to a deduction for 
costs, and therefore the most largely net. In other words, 
it is the most hkely to be super-marginal. 



CHAPTER XIII 

THE NATURE OP ADVENTITIOUS UTILITY 

Adventitious utility has been defined as that part of the 
utihty of a good which is attributed to it on account of the 
distinction that its consumption or enjoyment is felt to 
confer on the possessor or consumer by comparison with 
others apparently or constructively not equally well able 
to pay. 

In discussing adventitious utihty we are obviously deal- 
ing with something very closely related to luxury. Both are 
phenomena of large expenditure or of unusual ability to pay, 
and so of large income. The man with little to spend de- 
votes most of it to articles having utility proper or those 
having necessarily transputed utility. Whether luxury is 
morally justifiable or not we cannot say, because we do 
not know what is meant by luxury, and perhaps could not 
arrive at an acceptable definition if we tried. By some 
it is said to refer to whatever is relatively expensive as 
compared with what habit and custom have made familiar 
to the person employing the term or applying the epithet. '^ 
Others distinguish some more specific element. 

We shall not attempt to discuss the relation between 
adventitious utility and luxury. Perhaps luxury is merely 
the refinement of consumption. Perhaps it is indulgence 

^ The relativity theory is best represented by Roscher, Grundlagen der 
Nationalokonomie, book v, chap, ii, 23d ed., p. 662. He emphasizes stage 
of civilization and degree of complexity of life as controlling the idea. 
By way of illustration he quotes an English writer of the sixteenth cen- 
tury who complained that men were building their houses of oak in 
place of willow; while formerly houses were of willow but the men were 
of oak. The full development of Roscher's view is contained in his essay, 
" Ueber den Luxus," in Ansichten der Volkswirtschaft aus dem geschicht- 
lichen Standpunkte, 3. Aufl., 1878. 



142 WELFARE AS AN ECONOMIC QUANTITY 

in the gratifications of adventitious utility. As actually 
used, the word more likely means both, and besides refers 
to various other aspects of expenditure. This confusion is 
readily explained. From the consumption or enjoyment of 
rare and costly articles strictly on account of their utility 
proper as developed by the refinement of consumption, it 
is all too easy to pass to the consumption or enjoyment of 
the very same articles merely or chiefly because of their 
costliness, and because of the impression upon others made 
by their possession and use. Transference of feeling in the 
individual and imitation of externals in society at large 
are continually bridging this gap and obscuring the divid- 
ing line. 

Adventitious utility is a product of social relations and 
of feelings of invidiousness and emulation. It is not the 
result of the intrinsic qualities of a good. Nor is it directly 
the result of the conditions of supply, though it has 
for its basis rarity and correspondingly high marginal 
utility. Adventitious utility is not, like utility proper, 
limited in amount by the intrinsic qualities of the good. 
Transputation, moreover, does not account for the acces- 
sion of utility received by an object that has become a 
means of distinction and of ostentation, although adven- 
titious utility, hke transputed utility, is superposed upon 
utility proper. Adventitious utility is a species by itself. 
But like transputed utility, it is always marginal, never 
super-marginal. This follows from the fact that it is a re- 
sult of economic value or price. 

Since the adventitious utilities are not present in the 
super-marginal utilities of the different units, thus requir- 
ing only decreased supply to reveal their amount, there is 
no form of curve appropriate to adventitious utility which 
may be discovered by changes in price. Adventitious 
utility is itself first created in due time as a result of in- 
creased or high price. The higher degree of marginal utility 
proper, unlike a similar degree of adventitious utility, is the 



THE NATURE OF ADVENTITIOUS UTILITY 143 

utility, previously in part super-marginal, of a unit put to 
a higher order of use than that formerly at the margin. 
The higher marginal utility is newly revealed to the market 
by the conditions of supply, but the utility itself, so far as 
it is utility proper, is in no sense so created. But in the 
case of adventitious utility, its very existence is dependent 
upon price or, strictly speaking, upon high price. A free 
good, or an abundant good, cannot possess it. 

The consumption or enjoyment of adventitious utility 
need not consciously be accompanied by social reference. 
The distinction valued may be transferred from social 
relations to the qualities of the object and the utility be 
thought of as inhering in it. It is with reference to the socio- 
psychical origin and development of this utility that the 
criterion of its adventitiousness is to be applied. The indi- 
vidual thinks he values for itself the thing possessing ad- 
ventitious utility, but he really values such an article as 
highly as he does only because of insidious associations and 
suggestions. Thus, although the consumption of articles 
for the sake of adventitious utility is objectively and so- 
cially uneconomical and even immoral, it is not subjec- 
tively so, and it justifies no inference as to the morality 
of the individual. Either by transference of feeling within 
the consumer, or because of incomplete subjective imita- 
tion of its originator, adventitious utility becomes psychi- 
cally an immediate utility. But it is only superficially so 
and is destroyed by analysis. 

Adventitious utility is a product of a sort of psychical 
parasitism. The fundamental processes of its evolution 
are affective suggestion and transference of feeling. In 
general, of course, transference of feeling is adaptive in 
character and of survival value. But the principle is also 
operative when the results are at best indifferent, which is 
the case with adventitious utility. It is its character as a 
by-product which makes appropriate the name "adventi- 
tious." The small feet of Chinese women are such an 



144 WELFARE AS AN ECONOMIC QUANTITY 

adventitious by-product of civilization. Dress and personal 
decoration have been thoroughly permeated with the same 
element from the beginnings of tatooing down. 

In the value of the diamond is to be seen perhaps the 
best example of adventitious utility. The profitableness of 
the policy of the great diamond monopoly in strictly limit- 
ing output is a result of the ordinary effect upon prices, not 
of mere limitation of supply, but of adventitious utility 
maintained by this policy. The great increase in the supply 
of diamonds since the opening of the South African mines 
has been accompanied by a marked increase in their value. 
The expectation of a decline in their price was disappointed 
only because of the fact that their utility is so largely 
adventitious. Even so the marked increase in supply 
accompanied by an equally marked increase in economic 
value has been possible only because of a general increase 
of free income, especially in America, which absorbs most 
of the world's production. The intelligence or the good 
sense of the people with increasing free income has not 
increased in proportion to their income, although this 
proposition needs to be qualified somewhat with reference 
to the serviceableness of the diamond as a consumption 
reserve. Even so there are much more economical modes 
of keeping such a reserve. 

The love of distinction is the subjective counterpart and 
basis of adventitious utility. The love of distinction may 
be a purely closet emotion. The judgment of one's self may 
be sufficient. But it is more likely that self-esteem will try 
to fi.nd support in the esteem of others. Even the sense of 
honor, though it may be desocialized, is usually a very 
social sentiment. A fortiori the feeling of economic dis- 
tinction will usually express itself outwardly and socially, 
and its means of expression will be more or less grossly 
material. Particularly where wealth is the main road to 
distinction, adventitious utility flourishes. It becomes 
sheer expense for expense's sake. 



THE NATUEE OF ADVENTITIOUS UTILITY 145 

The quantitative judgments of the human mind are 
essentially relative and comparative. Weber's Law is a 
phase of this fundamental fact. Only through the adoption 
of physical means of measurement do quantitative judg- 
ments come to have the appearance of absoluteness. Hence 
a man is naturally inclined to estimate his own worth by 
comparison with others. Much depends upon the character 
of the individual whether this procedure is used more as an 
excuse for defects or as a spur to ambition. But even the 
most rational and philosophically minded person never 
quite frees himself from this sort of thing and thus comes 
to value himself according to intrinsic qualities. Indeed, 
this tendency of the human mind is not merely a result of 
general adaptation, but it has a special fitness for the pur- 
poses of social organization and the division of labor. No 
men are perfect nor can they become so, hence all that 
social economy can do is merely to fit the best available 
man into the most appropriate place. That which is nec- 
essarily imperfect, or good only in one or few ways, as is 
usually the case with human nature in the concrete, must 
be judged relatively. Whether a man is good for much or 
"good for nothing " depends upon what kind of man is 
needed for some specific purpose and upon the facility of 
supplying the demand. The practical importance of the 
man will have little to do with his excellences or defects of 
temperament and disposition as measured by general and 
absolute standards. The man himseK will disregard the 
qualification and attribute enhanced importance to his own 
positive qualities. The practical judgment of magnitude is 
relative. Thus adventitious utility has its foundations 
deep down in human nature. 



CHAPTER XIV 

SOCIAL PHASES AND THE ECONOMIC STATUS 
OF ADVENTITIOUS UTILITY 

In viewing briefly the phases of adventitious utility we shall 
touch upon certain socio-psychical phenomena involving 
principles of general bearing. We need to use the principles 
that would constitute the developed science of social psy- 
chology. But we must perforce be content with rather 
vague foreshadowings of such principles. 

The phase of the evolution of adventitious utility that 
first deserves attention is the class-standard in consump- 
tion.^ This is in part a result of custom and imitation. 
Passively to ride walking distances in a vehicle reserved 
for one's exclusive use is perhaps historically the most con- 
stant mark of "class." The nobleman has always been 
separated from the commoner by habits of dress and liv- 
ing, and has usually felt called upon to practice a " noble ex- 
travagance." Customary distinctions between the classes 
in matters of consumption have, under cruder social con- 
ditions, frequently been enacted into laws. Inequahty in 

^ In the chapters on adventitious utility the writer is greatly indebted 
to Thorstein Veblen's brilliant contribution to sociology as well as to 
economics, The Theory of the Leisure Class, which develops the theory of 
adventitious utility in a different way and under other names. Phases of 
the same thought are more than hinted at by the founder of political 
economy, clearly formulated by John Rae (New Principles of Political 
Economy, 1834, book ii, chap, xi), and forcibly, though cursorily, stated 
by Senior {Political Economy, 1850, p. 12). Indeed, they appear as ele- 
ments in most theories of luxury. Among such studies of importance may 
be mentioned: Baudrillart, Histoire du luxe privS et publique depuis V anti- 
quity jusqu' d, nos jours, 1878-80, and Laveleye, Le luxe, 1887. The con- 
tribution, if it may be so dignified, of the present essay at this point 
is the restatement of these ideas in their connection with fundamental 
doctrines concerning utility and its variation. 



SOCIAL PHASES OF ADVENTITIOUS UTILITY 147 

the distribution of income is very clearly the foundation for 
the sort of adventitious utihty that depends upon a class- 
standard. An article that is known to be consumed habit- 
ually by a higher class, and by its members chiefly, has by 
reason of this fact a supervening utility in addition to that 
due to its intrinsic qualities. Purple in the ancient world 
was a badge of superiority specially fitted for this purpose 
by reason of the conspicuousness of the color and the high 
cost of the dye. But the splendor of the Tyrian "purple" 
could not survive the cheapness of red dyes. There have 
been times in the history of civilization when drunkenness 
was the privilege and evidence of superior social standing, 
whence the descriptive phrase, "drunk as a lord." Class 
aspirations have of course their good as well as their bad 
side — their good side especially in the patronage of 
literature, science, and the fine arts. But in practice, for 
most of the members of the upper classes, the side most in 
evidence has always been adventitious, and thus only by 
accident partly of good effect. 

Since means have increased and the outlook of the lower 
classes has been so much enlarged by education, the lines 
between classes are no longer so definite as formerly. But 
industrial progress and the spread of democratic ideas have 
only made more intense the struggle to preserve marks of 
social distinction already attained, or to gain higher ones. 
" Keeping up appearances " is the controlling factor in the 
consumption of the families that would in England be 
called "middle class." This is obviously a phase of adven- 
titious utility. Inordinately high expenditure for external 
clothing and house rent, compelling sacrifices of utility 
proper, is common among all classes with limited incomes. 
The vogue of the brief summer vacation at the seashore 
or in the mountains and of travel in general, especially for- 
eign travel, is to a considerable extent due to adventitious 
utility, although here, as always, adventitious utility has 
a more solid foundation of real value. The extent of the 



148 WELFARE AS AN ECONOMIC QUANTITY ' 

demand for automobiles is now plainly much in excess of 
any utility proper which they afford. 

Adventitious utility is not only the basis of the imitative 
class standard in consumption, but it is also the great 
factor in the breaking down of external class distinctions 
when economic conditions make this possible. The domi- 
nance of the political theories of the Revolutionary Era 
and, still more important, the spread of well-being and the 
enlarged influence of the middle class resulting from the 
Industrial Revolution brought about the cheapening and 
discarding of fixed marks of class. With the loss of fixity 
in such distinctions came the dominance of fashion-imi- 
tation instead of custom-imitation, to use the phrase of 
Gabriel Tarde. The lower classes are now able to imitate 
their "betters," and do. This is in part the cause of the 
tendency toward unsubstantiality and tinsel in the con- 
sumption of the poorer classes. Continual change in 
modes of dress is now necessary in order that the upper 
class be enabled to possess marks of distinction that 
those below them in the social scale have not yet imitated. 
Fashion is thus a moderate but typical form of ostentation. 
Prompt imitation compels rapid changes in the garments 
of "society." 

The characteristic quality of fashion appears to be quick- 
ness of change. But in fact fashion is essentially conform- 
ism rather than caprice. It is a good example of one type 
of socio-psychic process, that is, leadership depending, not 
on initiative or originality, but on a dehcate sensibility to 
the inarticulate wants of the majority. The street-tough 
gets his cue from the gang and is followed by them be- 
cause he gives definite expression to their cravings and 
impulses. Our successful politician of the lower order is of 
the same type. Likewise, the leader of fashion is no more 
ruler than ruled. He (or she) is keener to see the trend, or 
economically more able than others to push things a little 
farther in the direction in which the mass is moving, or if 



SOCIAL PHASES OF ADVENTITIOUS UTILITY 149 

the time is ripe, he will begin the reaction at just the "psy- 
chological moment," That the leaders of fashion are them- 
selves in turn the tools of tailors and dressmakers fits well 
into the general scheme. 

Dress is the great realm of fashion chiefly because it 
affords the best opportunity for indulgence in adventi- 
tious utility on a small scale. It is not true that changing 
fashions in dress are due to the desire for change for the 
sake of change. Gregariousness in wants is the foundation 
of fashion and of itself it would not produce rapid change. 
The impulse to change comes from another source, that 
is, from adventitious utility. Style of dress is an easy and 
fit means of distinction and ostentation, but it may be 
quickly imitated, hence resort must be had to rapid 
change. On analyzing stylishness we find the suggestion 
of newness an important element. But the new style must 
have only the semblance of originality. The suggestion of 
expense also is rather more important than newness for the 
agreeable effect of the "latest style." Newness itseff is 
scarcely more than a phase of the suggestion of expensive- 
ness. It costs a great deal to dress always in the newest 
mode. It is evident that the utility of both these elements 
of fashionableness is chiefly adventitious.^ 

Running through all adventitious practices is the sub- 
ornation of others to serve the exaltation of the ego. In 
primitive times there was scarcely any other way to spend 
one's surplus than to feed hordes of retainers and lackeys. 
Nowadays the number of those that minister to the per- 
sonal wants of individuals is less noticeable, partly because 
there are so many ways of spending one's surplus on goods, 
partly because such services have to a large extent become 
institutional and available to all comers. It is probable that 
the number of persons employed directly in the service of 

1 Cf. Locke, Lowering of Interest, 1692, pp. 93-94: "Things of fashion 
will be had . . . whatever rates they cost, and the rather because they 
are dear." 



150 WELFARE AS AN ECONOMIC QUANTITY 

individuals has been declining of late relatively to the 
total population. But the proportion of persons so em- 
ployed institutionally has doubtless greatly increased. As 
to the morality of such demands, they should be viewed in 
the light of the Kantian imperative, — so act as to treat 
humanity in every case as an end, never as means only.^ 
But so long as human nature remains what it is, some men, 
if they have the pecuniary wherewithal, will seek to make 
others mere means to their ends. 

As regards the moral quality of indulgence in adventi- 
tious utility generally, it is certainly bad. There is much 
similarity between cruelty and ostentation, both depend- 
ing for the enjoyment they yield on the opposite effect 
upon others, thus being anti-social, and objectively, if not 
subjectively, malicious. The important qualification of 
this proposition is that envy of indulgence in adventitious 
utility, however general and however much a source of 
unhappiness, is irrational and itself a weakness or defect. 
Although consumption for the sake of adventitious utility 
is thus objectively immoral, there is not any subjective 
wrongdoing or bad intention implied, owing to the thor- 
oughly conventional and social character of such utility 
and to the resulting transference of feeling which makes it 
pass for a quahty of goods. 

The element of adventitious utility is to be condemned 
also from a socio-economic point of view, if this can be 
distinguished from the ethical. It is a parasitic after- 
growth that should be pruned away from economic prac- 
tice. Proper, particular, complementary, and transputed 
utilities are positively important, not merely in the indi- 
vidual, but also in the social economy. Adventitious 
utility, on the other hand, cancels out in the social sum- 
mation of welfare; that is, the enjoyment of it by one mem- 
ber of society is accompanied by actual or presumptive 
subtraction from the enjoyment of others. The enjoy- 

1 Kant's Theory of Ethics (Abbot's translation), 6th ed., 1909, p. 47. 



SOCIAL PHASES OF ADVENTITIOUS UTILITY 151 

ment of the one is on the whole proportional to the dis- 
agreeable feelings of envy and humiliation excited in 
others. From the social point of view there is no real need 
corresponding to adventitious utility and no benefit from it. 

Ostentation, and all forms of adventitious utility, how- 
ever, are still chiefly a private concern, or rather they are 
not proper subjects of regulation by law or of drastic con- 
demnation by pubHc opinion. They are of the nature of 
personal vice as much as of social immorality. They can- 
not be directly dealt with by society to advantage and they 
are hkely to bring on themselves their appropriate punish- 
ment. The "vanity of life" is often only the vanity of 
adventitious enjoyment and of merely relative ambitions. 

The foregoing leads us up to the conception of value 
without utiHty, though utility is the foundation of value. 
The clue to the solution of the paradox lies in the fact that 
adventitious utility, which, from a social point of view, is 
not real utility, but only such in opinion, may serve as a 
basis for value. Value is, therefore, not necessarily in pro- 
portion to utility proper, and may exist without involving 
any considerable element of it. There is a reason for the 
difficulty the older economists sometimes found in this so 
utterly contradictory relation between utility and value. 
From the social point of view, value is not in proportion to 
rationally attributed utility, even when we qualify utility 
as marginal. Adam Smith should be interpreted as mean- 
ing that the diamond has little utility proper when he says 
that it has great value but little or no utility. ^ Adventi- 

1 Wealth of Nations, book i, chap, iv, p. 30, of Cannan's edition: "A 
diamond has scarce any value in use; but a very great quantity of other 
goods may frequently be had in exchange for it." Bohm-Bawerk criticizes 
this point of view on p. 153 of the Positive Theory of Capital (translation), 
in terms that remind one of the above passage, though he does not men- 
tion Smith in this connection. Smart, in his Introduction to the Theory 
of Value, p. 33, doubtless following Bohm-Bawerk, is even more explicit 
as to the explanatory sufficiency of the marginal utility due to the 
small quantity of diamonds available. Bahm-Bawerk's criticism seems 
to be an echo of J. S. Mill, Principles of Political Economy, book in. 



152 WELFAEE AS AN ECONOMIC QUANTITY 

tious utility is not utility, but expense masquerading as 
utility. It is valuation and mere economic value, without 
utility. Not all wealth, as commercially gauged, contri- 
butes to welfare. 

There is a tendency on the part of merchants to accom- 
modate customers who wish to pay high prices merely 
for the sake of demonstrating their ability to pay. The 
perfect working of such a system, however, presupposes 
enough absence of competition to make possible the dif- 
ferentiation of charges. A fashionable location greatly 
helps. But the merchant may wish to get the trade both 
of those who want their money's worth and of those who 
want to prove that they do not have to consider whether 
they get their money's worth or not. The device of low- 
price sales will sometimes accomplish this purpose. The 
ignorance and pride of buyers may be an efficient barrier 
between different classes of customers, and only less secure 
than monopoly. But in order that such mercantile de- 
vices may work well, the social distinction due to price 
paid must be clearly evidenced, for example, by the name 
and location of the "shop." There must also usually be 
the semblance of enhanced utility accompanying the 
higher price. 

The relation of adventitious utility or luxury to taxa- 

chap. I, sec. 2, who refers to De Quincey. To none of these writers does it 
occur that what functions as utility may be supposititious. 

In the Lectures of Adam Smith, pp. 176-78, we find the factors deter- 
mining price discussed in a way similarly suggestive. He enumerates 
three, the first being demand or need. The second is abundance or scarc- 
ity in proportion to need. This is illustrated by the dearness of diamonds, 
but that, he says, is due more to the third factor, which is the riches or 
poverty of those who demand an article. " When there is not enough pro- 
duced to serve everybody, the fortune of the bidders is the only regula- 
tion of the price." This third factor does not appear in the corresponding 
passage of the Wealth of Nations. But he does say (book i, chap, xi, part 
III, p. 224) : " In times of wealth and luxury what is rare with only nearly 
equal merit is always preferred to what is common." An especially pointed 
remark is quoted below on p. 184. Adam Smith barely missed presenting 
a developed theory of adventitious utility. 



SOCIAL PHASES OF ADVENTITIOUS UTILITY 153 

tion is significant. A tax on an article of luxury may not 
decrease the demand but may even have a contrary effect. 
The higher the price paid the more decisive is the evidence 
of ability to pay and of riches. It was Rae's view ^ that, 
since the consumption of articles of luxury is favored by 
increase of cost, a tax on luxuries might be used to obtain 
public revenue without sacrifice to the consumer. If man 
will incur expense for the sake of expense, it is well that the 
state should profit by the tendency, rather than that it 
should result merely in waste of labor. There is certainly 
no better evidence of "ability to pay" than the desire to 
pay merely for the sake of paying. 

All of nature's wastes, and not merely those in the field 
of biology, are likely to contain germs of future adapta- 
tion. Adventitious utility is one of the most conspicuous 
phases, if not the most conspicuous, of the waste of surplus 
socio-psychic energy and of pecuniary means. Hence we 
should expect the prodigality and the wastes of adventi- 
tious utility to contribute something to progress. The study 
of social evolution affords convincing examples. The 
striving for display that expressed itself in decorating the 
person furnished the foundation for the evolution of cloth- 
ing, Esthetic developments have been especially depend- 
ent upon originally extraneous suggestions, the mere 
oddity of unusually fine and curiously colored textures and 
designs first attracting attention. Scarcely any decora- 
tive motive is without its historic symbohsm. Prominent 
among others are the symbols of rank and riches, which 
are impressive because of their adventitious nature. Many 
useful commodities, soap and cotton cloth among others, 
first gained recognition as expensive foreign rarities. The 
high price of luxuries, besides, operates as a stimulus to 
invention. All these things may be said in extenuation of 
adventitious utility. But they fall short of justifying it. 

Waste is a question of the proportion of results to means 
^_New Principles of Political Economy, book in, chap. ii. 



154 WELFAEE AS AN ECONOMIC QUANTITY 

and a matter of quantitative relations, as is the variation 
of utility. But it is obvious that the greatest significance 
of adventitious utility is not in relation to the variation of 
utility, in the sense which makes that the genus of which 
diminishing utility is a species. The character of the varia- 
tion of such utility is, however, sufficiently worthy of re- 
mark, though its protean nature makes any account of it 
seem unduly formal and abstract. 

It is sufficient here to consider the phenomena of social 
variation only, and first from the point of view of com- 
mercial demand. Adventitious utility thus viewed is al- 
ways equal to value and is capable of any degree of ex- 
pansion. It varies as a people's power to spend. There 
will come a stage when a greater quantity, not only of 
food, but also of most other goods, cannot to advantage be 
used, though changes in quality may still be valued. The 
appetite for adventitious utihty, on the contrary, is quanti- 
tatively insatiable. The increase of the amount of adventi- 
tious utility is Umited only by the increase of riches, that 
is, of large private fortunes. But adventitious utility will 
attach itself to different objects as man's powers of pro- 
duction increase. 

From the point of view of the sum of the individuals 
who compose society and as measured subjectively, on the 
other hand, the net amount of adventitious utility is and 
remains at zero or thereabouts. The gain of one is the loss 
of others. 



CHAPTER XV 

HOSTS AND MASKS OF ADVENTITIOUS UTILITY 

Adventitious utility has been called parasitic. Parasitism 
is both a biological and a social phenomenon. The cor- 
relate of the parasite in biology is the "host," the term 
being borrowed from social relations. In bringing back 
this term to the field of social science we give it a connota- 
tion analogous to that which it has in biology, and there- 
fore somewhat unusual. But the biological conception is 
of so much value for social science that this unusual sense 
of the word is not effective as an objection. 

The parasite's host, at least in the case of so intelligent 
an animal as man, must be deceived as to the real nature of 
the relation existing between him and the parasite. Hence 
the parasite must disguise itself and appear to be some- 
thing different from what it is. It is a permissible personi- 
fication to say that adventitious utility assumes masks. 
There is, of course, no hypocrisy involved, and those who 
actively foster adventitious utility are more deceived than 
anybody else. But adventitious utility must appear to be 
real utility to get its hold upon the consumer. Its masks 
are numerous and serve their purpose well. 

Adventitious utility is especially likely to cloak itself 
in the guise of aesthetic enjoyment. A good criterion for 
discrimination is how far substance is sacrificed to externals 
and how far form is determined by cost. Where the costli- 
ness is in the material, great expensiveness is achieved 
with little ingenuity. Costliness from expenditure of labor 
has the advantage of requiring greater cleverness, but 
the rare material is usually more impressive for the mass of 
observers. Art is either not yet evolved or it has decayed 



156 WELFARE AS AN ECONOMIC QUANTITY 

when the material surpasses the workmanship. But exces- 
sive ornamentation also is a phase of decadence and of 
adventitious utility. The evidence and the symbols of 
costliness are the great pitfall of the fine arts. It is not to 
be absolutely denied, however, that mere costliness may 
be a legitimate factor in the impression achieved, though 
its place must be a small one. 

Adventitious utiUty can the more easily pass for aesthe- 
tic because the complementary relation plays so large a 
part in art. An efifect may be complementary in a group 
of effects which is adventitious, and thus its nature is less 
directly observable. The analysis that reveals the com- 
plementary element is likely to stop there. Just so Hindu 
mythology finds support for the earth on the back of an 
elephant, and then — a thought which probably occurred 
several centuries later — for the elephant on the back of 
a tortoise. 

The supplying of complements involves a possibly dis- 
proportionate increase of utility. But a complement can 
produce such an effect only initially and not while being 
made common and dominant in its group. The comple- 
mentary value of rarity in time — if rarity is needed for 
"a change" — is similarly Kmited. If a very rare article 
is made common in a private economy, this must be ulti- 
mately on grounds of expense and ostentation, since an 
article common enough to be used independently and to 
dominate quantitatively in various groups can have in 
some of its uses only particular utility based on the strength 
of its intrinsic qualities. Only adventitious utility can 
provide the semblance of warrant for the disproportionate 
expense. The naturally complementary character of the use 
of the rare makes its dominating use, even where the burden 
can be borne, an aesthetic monstrosity. If a merely impos- 
ing effect is sought, it may be attained by such means, 
but even that will not often bear analysis. A building of 
polished marble is scarcely justifiable, aesthetically or eco- 



PARASITISM OF ADVENTITIOUS UTILITY 157 

nomically, except as the center of a group not marble; but 
the buildings constituting a "civic center," and thus in 
effect complementary to the other buildings of a city, may 
likewise be of marble. Such distinction is not appropriate 
for a private house, but only for a public building. Com- 
fort and elegance are permissible for a private citizen if he 
can afford them, magnificence never. The use of marble 
to trim a residence, however, may be complementary and 
suitable, supposing it to be in harmony with the other 
material. 

Much aesthetic development is yet needed in order that 
people may see the meaning and limitations of the com- 
plementary use of the rare. Judgment as to what is due 
to intrinsic qualities and what to rarity is often difficult 
on account of rarity being so often supported by real excel- 
lence. This is conspicuously the case with the precious 
metals and precious stones, which possess great natural 
beauty and durability. But the limit which should be 
fixed by their utility proper, or by the utility proper of 
the groups in which they are used, is often greatly sur- 
passed. The rare is often esteemed the one good thing fully 
worthy of confident use. Aside from the narrow-minded- 
ness of such a course, — narrowness being admittedly 
often enough of practical advantage, — this policy means 
foregoing the attempt adequately to utilize goods. 

The emphasis on genuineness as against show is not 
properly an emphasis on rarity. As an emphasis on in- 
trinsic quahties, it should lead directly away from adventi- 
tious utihty. Show and semblance are imitations of the 
rare intended to appropriate to themselves its distinction. 
The motive is, of course, the desire to obtain adventitious 
utility, but the effect is only a weakened reflection of the 
same quality of the imitated rare. The spread of imitations, 
due to mistaken ambitions of the many, has introduced, by 
way of contrast, a psychical element which does not prop- 
erly belong to the consumption of the rare and costly. 



158 WELFARE AS AN ECONOMIC QUANTITY 

Genuineness should not be thought of, nor sought for, 
principally in this region. " Real " lace ought to be dis- 
tinguished by intrinsic qualities instead of by the fact of 
its having been painstakingly made by hand. 

The refusal to accept economic substitutes, also, is not 
as such an emphasis on genuineness, though it usually 
parades under that name. Substitution hmits enhance- 
ment of value. Substitutes for articles both of transputed 
and of adventitious utility should be adopted in so far as 
it is possible to do so without undue sacrifice of utility 
proper or of complementary utility. A substitute is very 
different from an imitation. The former offers essential 
quaUties; the latter, external appearances. It is bad econ- 
omy, unless there is no choice, to buy an article whose 
price is bid up by reason of adventitious considerations. 
It is only in the expenditure of the rich that we should 
expect httle substitution, and there chiefly because even 
a very great saving of money will not compensate for 
the effort and thought required for careful expenditure. 
Among such, too, the doubt should arise as to whether it 
is entirely right, morally and aesthetically, to sanction the 
use of what will not ordinarily be used without abuse. 

The "best quality" is not necessarily the rare. It is the 
quality which best accomplishes the purposes of the good. 
In so far as the difference between the best and the less 
good is due to quantity of elaboration rather than to the 
work of nature, and in so far also as the labor can be had 
easily in increasing amount, the best certainly is not the 
rare, for if so, then the best is merely what costs most. 
The due proportion is not the superlative. The best 
quality of cloth is not always of the finest texture. The 
coarse article not only has its place, but may be best for 
some purposes. Sail cloth for mercantile use would not be 
improved by great fineness of fiber and weave. The ap- 
petite for rarity and expense may also find recondite forms 
of skill as well as expensive material. Such demand is too 



PAEASITISM OF ADVENTITIOUS UTILITY 159 

often not for intrinsic excellence and genuineness, but for 
adventitious utility. The difference between the rare and 
the best should be clear if strict attention is paid to intended 
uses. 

The indiscriminate pursuit of the " best quality" means, 
not only a failure to adapt the qualities or grades of arti- 
cles to their uses in a way to make the most of their total 
utility, but also frequently a misapplication of articles 
which deprives them of their due effectiveness. The re- 
finement of consumption consists, in giving each kind and 
quality its place, not in finding room only for the rare and 
the fine. But the former alternative makes greater de- 
mands on the consumer's intelligence. Round steak is 
more nourishing than the tenderer and more tasty cuts, 
and it is only poor economy, that is, failure to make the 
most of the division of use, that does not give it more of a 
place in the cuisine of the well-to-do, though that would 
not be accompHshed by serving it broiled rare. 

Natural differences should be made the most of. The 
intentional manufacture of inferior grades or qualities, 
merely for absolute cheapness and without regard to econ- 
omy, is a very different matter. The merely coarse may 
be more durable. But the shoddy clothing that will not 
last — perhaps even this material has its proper place in 
horse-blankets — finds a market only because of ignor- 
ance, or because of adventitious motives that prefer sham 
to substance, or because of a hand-to-mouth poverty that 
makes it impossible to economize and to provide ade- 
quately for the future through using more durable goods. 

If, as is conceivable, the best of a class of goods is so 
very versatile as to be the best adapted for all the uses of 
the class, then the situation should be dealt with accord- 
ing to the principles governing the economic application 
of the rare, that is, its use should be husbanded for ex- 
traordinary occasions and unusual complementary effects. 

Differences of " quality " (fineness) are differences of de- 



160 WELFARE AS AN ECONOMIC QUANTITY 

gree rather than differences of kind. Rarity of "quahty" 
is not worthy of as much esteem as the more individual 
rarity of kind. But if adventitious effects are what is 
sought, the short and easy method for the invidiously 
ambitious is to surpass competitors on their own ground. 
Adventitious utility here, as in the case of f ashionableness, 
favors but a modicum of individuality. It keeps too close 
to the throng to give its wasteful vagaries even their due 
value as experiments. The "best," in the sense of the rare 
quahty, has an exaggerated and unjustifiable importance 
in current ideas about consumption. The finer and flim- 
sier weaves of silk and cotton, — the latter, however, not 
sold under that name, — the "sheer" and the "delicate" 
fabrics, used especially for feminine apparel, owe their 
prominence partly to fashion, but more fundamentally 
to poverty of thought. Those for whom, in their own 
opinion, " the best is none too good " are lacking in per- 
spicuity with reference, not merely to their own qualities, 
but also to the nature of their surroundings. 

The connotation of elegance, which luxury, as the con- 
sumption of the rare, has acquired, is no more essential to it 
than is the connotation of refinement. Both are due to sug- 
gestions of expense and of the results expense may be 
expected to produce. Such association of ideas is quite 
extrinsic. Evident lavishness in the use of money, as well 
as of goods, is the opposite of elegant. 

No kind of thing that presupposes much expense or 
much leisure remains without the taint of adventitiousness. 
The most trivial and the most important matters are ahke 
made to serve this interest. What is "good form" and 
good manners is very largely determined by such considera- 
tions. So-called "culture," as well as manners, may be- 
come chiefly a mark of leisure. So-called "literature," that 
is, polite letters, loses its relation to life and is to be differ- 
entiated as that portion of thiugs written and printed 
which can be put to no practical use, or has demonstrable 



PAEASITISM OF ADVENTITIOUS UTILITY 161 

value only on account of its immediate appeal to such 
emotions as do not impel to action, that is, the sensibihties 
and sentiments. The literature of the sciences according 
to this point of view — which it should be said is more 
often approximated or implied than definitely accepted or 
expressed — is no longer "literature," nor does familiar 
acquaintance with it afford "culture." Philosophy is not 
"literature." History is not "literature." Only poetry and 
fiction are entitled to the name. The fine arts show analo- 
gous tendencies. Most art is aristocratic, too much the 
satellite and parasite of the leisure class. Use and beauty 
are divorced. Much labor in the making and an adventi- 
tious manual dexterity is considered more important than 
the skill of eye and mind that avails itseK of the accuracy 
and speed of machines. The man of "cultivated tastes" 
must be removed from realities and unfit for work. Lit- 
erature, culture, and the fine arts — thus made to have an 
antithetical relation to physical environment and to social 
needs — become creatures of fad and fashion. Of course 
there are others for whom these words have a very different 
meaning. Indeed it is essential to the nature of adventitious 
utility that it have a foundation in real values. 

So it is that adventitious utility is mixed with other 
elements in accordance with its parasitic nature. The mo- 
tives of human choice and action are in general mixed, but 
nowhere more so than in certain complex phases of con- 
sumption. Adventitious utility is difficult to observe clear 
of entanglement with real utility, and is in fact entirely 
separable only by abstraction. Though a dish be favored 
chiefly because it is expensive and known to be so, it is 
likely to have also real excellences. But perhaps the case 
most thoroughly mixed in the entire field of consumption 
is that of tobacco-smoking. Learning to smoke does not 
result from direct and immediate enjoyment of the process. 
The boy, in college or before, feels that it makes him a 
man to smoke. The habit probably never loses some such 



162 WELFARE AS AN ECONOMIC QUANTITY 

adventitious appeal. It suggests leisure, and may be made 
evidence of considerable expenditure. It is often merely 
a pretentious kind of idleness. The habit is also to some 
degree an aid to sociability. The smell of smoke is intrin- 
sically pleasant to some people and one can learn to appre- 
ciate the taste. It has been suggested also that the suck- 
ing movements involved are primitively and instinctively 
pleasant. This is doubtless a vague reminiscence of the 
time when such a use of the lips was of vital importance. 
Finally, when the habit is established, there may be a real 
dependence on the properties of the weed. Smoking may be- 
come the most valued of personal indulgences. The utility 
of smoking is thus highly conglomerate. Wherever adven- 
titious utility enters into consideration, it is almost sure to 
be but one element in a complex situation. This fact renders 
all the greater the need of taking thought about such mat- 
ters. That articles of adventitious utility always have other 
sorts of utility increases the danger of harboring this pest. 
We need a preacher of the immorality of the superlative, 
or at least of that sort of superlative which is valued for its 
exclusiveness. Striving for such a "best" is the common- 
est cause of failure to "hold fast that which is good." So 
much of good in human achievement is motived by ambi- 
tion and related feehngs, and we are so accustomed to 
looking for the effects of ambition, both good and evil, only 
in things of heroic dimensions, that the evil influence of 
such feelings upon the daily practices of most of us escapes 
notice. To insist upon the use of the superlative in mere 
means, and in any merely material thing, is to turn away 
from the good. Ends and aims should be the highest and 
the best. But material means — in other words economic 
goods — should be whatever serves the purpose efficiently 
at small cost. Searching out and competing for the " best," 
as conventionally understood, constitutes one of the most 
serious of economic wastes, and therefore a grave moral 
wrong. 



CHAPTER XVI 

MULTIPLE UTILITY 

A GOOD or service collectively enjoyed has the character of 
utility simultaneously in relation to two or more consumers. 
The appropriate name for this capacity is multiple utility. 
Such institutions as the theater, the museum, the public 
park, and the public library possess multiple utility. Most 
means of instruction and amusement either have or are 
capable of having this character. Professional services of 
this nature can be economically used only through such 
collective enjoyment. 

"Public service" is a phrase much heard in these days. 
It should mean service rendered to the public generally, 
whether in a governmental or private capacity, thus hav- 
ing in greater or less degree the character of multiple utility. 
Such services are often personal in the sense of having for 
their object the person or persons who constitute the public. 
The possibilities of expansion of this sort of work are par- 
allel in extent and importance with those of the material 
forms of multiple utility. The supply of those who are 
competent to undertake such service is steadily increasing. 
That, however, is as much the result of the increasing 
wealth of society, and especially of certain classes, as it is 
of increasing humanitarian interest. But the writer is here 
concerned rather with such multiple utility as is embodied 
in material goods. 

The material goods especially susceptible of multiple use 
are those possessing predominantly existential utility. In- 
deed existential and multiple utility have much in common. 
The former relates to plural use in the time dimension; the 
latter is plural contemporaneously or socially, that is, in a 



164 WELFAEE AS AN ECONOMIC QUANTITY 

sense, spatially. The possibility of thus realizing much 
utility at relatively small cost holds for both. Temporal 
plurality of use, moreover, is a condition specially favor- 
able to the social multiplication of use. Though not, like 
multiple utility, by nature and definition social, existential 
utility may be the more easily socialized by reason of its 
existential character. But services also, though processive, 
may have multiple utility. The utility of a dramatic per- 
formance is usually such. 

', It would perhaps be logical to make a distinction between 
socialized existential utility and strictly multiple utility. 
A book in a pubhc library cannot well be used by more than 
one person at once. But in economic and social character 
the uses made of it are not essentially different from the 
use made of a painting in a public art gallery. Moreover, 
the housing of both book and picture is of multiple utihty. 
If books could not be used by many in succession without 
appreciable loss, the situation would be different. Strictly 
multiple utility is the highest type of the utihties corre- 
sponding to a group of modes of utilization which possess in 
varying degree the same social or collective character. To 
use the term to represent the entire group seems scarcely 
avoidable. 

The inducement to socialization of enjoyment is the in- 
crease of its amount thereby effected. The cost of goods 
to a circle of consumers constrains to the socialization of 
enjoyment, in so far as the nature of the utility permits. 
In strictly multiple utility there is no appreciable diminu- 
tion of enjoyment for one person by the simultaneous 
enjoyment of the same object on the part of others. The 
enjoyment is as often increased for the individual by 
reason of its sociaUty or group character as it is diminished 
by the breaking over of individual exclusiveness. Unless 
physical conditions require exclusiveness of use, the utiUty 
due to this condition is in fact as much apparent as real, for 
the exclusiveness is often not the means of enjoyment but 



MULTIPLE UTILITY 165 

its adventitious end. So far as it is adventitious it should of 
course have no weight with the economist. 

In practice the tendency to sociahzation of utiHty usually 
depends upon the ability and inclination of a larger circle 
to contribute to meeting the expenses. The process of 
socialization, therefore, is conditioned by and dependent 
upon a considerable degree of equality of means and also of 
tastes. In the case of utilities publicly maintained and free, 
the former condition is removed and the latter made the 
more important as alone limiting the extent of multiple 
enjoyment. 

Public property has developed largely with reference to 
the supplying of multiple utilities. The police function 
itseK might be so viewed; and certainly in the performance 
of its cultural functions, the state acts with direct and al- 
most exclusive reference to such utilities. 

A calculation to determine whether a great public work 
should be undertaken ought not to confine itself to the 
consideration of merely economic or market values. 
Utilities below the margin — which in the case of the poor 
are by no means necessarily small — should have weight. 
Number, furthermore, may outweigh high degree, and 
multiple utility means numerous uses. The extent and 
importance of the benefit, with little reference to ability 
or inclination to pay for it in the concrete details of its 
supply, are the things to be considered. This is often over- 
looked in the debate over questions of public ownership in 
a way that makes some of the arguments against such a 
policy ridiculously inept. 

It so happens that it is especially multiple utility whose 
benefits are least adequately estimated in terms of the 
present and personal. Since the immediate utility of means 
of communication and transportation is definite and tangi- 
ble, it would be possible to leave these entirely to the care 
of private interests. But there are so many indirect bene- 
fits to be obtained from good faciUties for such purposes 



166 WELFARE AS AN ECONOMIC QUANTITY 

that it is sound public policy for the state to favor the mul- 
tiplication of their use. Pubhc roads free to all are now 
taken as a matter of course. Because of the permanent and 
social character of the enjoyment of objects of art, more- 
over, heavy expenditure for architecturally fine public 
buildings is justifiable. The needs of transportation, com- 
munication, instruction, recreation, and culture are rightly 
felt to be proper fields for the extension of collective en- 
terprise in the supply of objects and services of multiple 
utility. 

For the sake of promoting the cultivation of multiple 
utilities, the state may properly change an economic into 
a free good. This it is coming generally to do in the case of 
elementary education. It does not follow that because such 
utility can thus be obtained without direct pecuniary cost, 
it is to be had entirely without cost or effort. There is 
always considerable indirect pecuniary cost, not to mention 
other costs. The utility of primary education is likely, be- 
cause "free," to be obtainable only in the more direct pro- 
portion to effort. This policy is therefore not at all social- 
istic. Compulsory attendance at free schools up to the age 
of thirteen or fifteen years would mean for the majority of 
parents a very considerable increase in the burden of edu- 
cating their children. 

To consider the educational activity of the state merely 
from the point of view of direct marginal utility to the indi- 
vidual does it great injustice. By affording through its 
schools some approach to equality of opportunity, the state 
intensifies the effectiveness of that competition which is, 
in the conception of individualistic economics, the chief 
means to maximum production. Education is therefore not 
only of direct and immaterial utility, but it is highly pro- 
ductive of wealth, and the more so if it is free. A mis- 
taken economic individualism in such matters is thus met 
and overcome on its own ground. But it is a poor concep- 
tion of the duty of society that allows one to assume com- 



MULTIPLE UTILITY 167 

mercial advantages to constitute the adequate and only 
justification for the policy. The furnishing of educational 
opportunities in the broadest sense may well be considered 
the great positive function of the state. 

The dependence of public health upon an unrestrained 
or even a lavish use of water makes detailed adjustment 
of charges to costs destructive of collective utility. On 
account of the large amount of fixed charges involved, also, 
any such system is likely to be uneconomical. Owing to the 
contagious character of certain diseases, especially of filth 
diseases, and to the social importance of sanitation, the use 
of such an object of collective utility as a public water 
system cannot well be regulated by separate individual 
interests and by such principles of atomized marginal 
utility and commercial value as manifest themselves in 
the market. 

Where the benefits resulting from state activity are 
more distinctly and tangibly of the nature of pecuniary 
advantage to the individual, it is possible for the state to 
charge the user in proportion to use without materially 
reducing the resulting sum of utility, unless the incidentals 
of such a system are too vexatious. This is the case with 
pubhc highways and with transportation facilities gener- 
ally. The omission of a charge may, also, sometimes be 
justified on the ground of the indirect cultural benefit of 
unhampered economic and social interchange of goods and 
ideas. Market principles are at least very largely modified 
in all such cases by considerations of public pohcy. The 
most notable instance of such modification is the system of 
charges for the transportation and delivery of mail. The 
economy of large and unified means of production is not in 
itself a strong argument for state enterprise in industry. 
The reasons are usually other than this, and are often 
sufficiently good to justify the use of the proceeds of taxa- 
tion to assist an enterprise apparently merely economic in 
character. * 



168 WELFARE AS AN ECONOMIC QUANTITY 

Public works are largely wealth-producing as well as 
productive of psychical income in the form of immaterial 
collective utility. The funded and capitalistic nature of 
expenditures for permanent material constructions, how- 
ever, gives them a peculiar character. Ought the market 
rate of interest to limit the amount of expenditure for such 
a purpose? Despite the fact that the state or society may 
be conceived to be immortal, and the duration of its needs 
therefore to be indefinitely long, the current rate of interest 
ought to determine the proper limit of fixed investment for 
the sake of obtaining multiple utilities, that is, in so far as 
abstract durability and soHdity of construction are con- 
cerned. Since the money for such pubhc works is usually 
borrowed, the running interest charge makes obvious the 
need of economy in this particular. But the economic 
principle would be the same if the means came from 
revenue. Hence durability must be influenced by the cal- 
culated interest charge. But interest-cost is not all that 
is to be considered. 

There is an income of enjoyment to be had from archi- 
tectural excellence in a public building which may well be 
set over against a considerable part of the interest. Not 
only so, but the aspect and reality of solidity and perma- 
nence are no inconsiderable element in the architectural 
effect. For this reason public buildings should be solid 
as well as comely, more solid and more comely than could 
be justified, in view of the interest-cost of durability, by 
figuring according to the principles of private economy. 
It is appropriate that government buildings designed for 
permanent use should be monumental. It is direct collec- 
tive utility, not the immortality of the state, that justifies 
buUding for the ages. Such utility of course could not find 
adequate expression through the purchasing power of the 
many who enjoy it. The enjoyment of it is mainly inci- 
dental or even subconscious, but in it are contained ele- 
ments of the highest human importance. 



MULTIPLE UTILITY 169 

Another form of public or national wealth which does 
not receive adequate care if left to divided and merely 
individual interest consists of the natural advantages and 
resources of a country. Especially where the utility in 
question is unimputable to isolated units of supply, the 
economical use and due conservation of such sources of 
production and enjoyment should be an important care of 
the state. Perhaps the most clear and convincing case is 
the duty of the state to preserve the natural beauties of its 
environment. The utility involved is both unimputable 
and multiple. Partly for similar reasons, partly in the 
interest of production, the state should care for the pres- 
ervation of forests. 

The prevention of wasteful exploitation and rapid exhaus- 
tion of limited and irreplaceable natural resources, such 
as mines, is also a legitimate public function. But here 
regard for the future requires hardly more than the appli- 
cation of the principles of discount and interest, especially 
since the possible developments of invention make some- 
what unpredictable just what the material needs of future 
generations will be. For example, we do not know how long 
man will care to procure heat and power from coal. There 
can be no question of preserving mineral resources abso- 
lutely. The rate of exhaustion, it is true, should not be 
more rapid than the regular discounting of the future 
makes profitable, but this check is already operative 
through private-economic principles. Perhaps in some 
countries the state may be more far-sighted than the indi- 
vidual, but this is not as yet true in the United States. The 
utility of a future supply of minerals is in the main imput- 
able, and the future in such cases may be left mainly to the 
care of private interest. In general the method of working 
natural resources, rather than the rate at which they are 
to be worked out, is the more fit matter for state inter- 
ference. 
The recently awakened interest of the American people 



170 WELFARE AS AN ECONOMIC QUANTITY 

in "conservation" is possibly of greater general than speci- 
fic importance. There is work to be done to retain for the 
public the benefit of public lands. But the demand for 
economical social utilization in place of exploitation for the 
sake of individual profits contains the germ of a social 
consciousness that means much more than the preserva- 
tion of forests and of mineral resources. 

In so far as the state or the government can act as vicar 
or surrogate for the mass of the people in respect of luxur- 
ious expenditure, luxury loses its egoistic and invidious 
character and receives enhanced social importance by 
acquiring multiple utility. Much public expenditure can 
be justified where the identical sort of consumption could 
with diflBculty find valid excuse in the case of a private indi- 
vidual. The architecture of public buildings, as already 
suggested, ought to be imposing and inspiring. Even merely 
decorative effects are worth paying for. Public "luxury" 
that is truly entitled to the name lacks the invidious or 
adventitious element. 

Even when the expense appears unjustifiably great in 
relation to its object, it is less a luxury, in the sense of in- 
volving disproportionate expenditure, because of the mul- 
tiple character of the utility. Public festivals that riot in 
display are not as wasteful as they seem. But the applica- 
tion of the public money to luxuries should usually be for 
permanent results and for more or less directly educational 
purposes. This educational quality is characteristic of 
expenditures for aesthetic and moral objects, for museums 
and the theater, and for celebrations and monuments of 
historically important and still significant events. 

Public luxury such as is beyond the reach of the poor 
otherwise than through public participation may take the 
place for them of exclusive and expensive, but otherwise 
analogous, indulgences of the rich. Such an opportunity 
has for the poor, in effect, quasi-complementary utihty. 
A public art museum is a quasi-complementary good, the 



MULTIPLE UTILITY 171 

more valuable in proportion to the dinginess of ordinary 
life. Heavy expenditure for decorative effects in churches 
and public buildings is often for this reason desirable where 
good taste would not permit it in a mere private dwelling. 

For a semi-public class of citizens, however, such as he- 
reditary nobility or the members of a royal family, or even 
a permanent high official class, magnificence of private 
life is sometimes permissible, supposing the public mind is 
favorably disposed. But in view of the spread and in- 
creasing dominance of democratic feeling, this exception is 
rather of historical interest than of present importance. 

It matters not that the luxury of the governing classes 
and of the state has sprung from personal and egoistic 
motives without thought of multiple utility. Here, as 
often, social importance and moral justification for insti- 
tutions whose origin and history call for a different judg- 
ment may come to exist through gradual evolutionary 
change. The magnificence of a monarch's court may be 
for the people the adequate symbol of national life and 
power. The richness of mediaeval religious architecture 
and ritual found response in popular emotion. A state 
church may be justijBed on grounds of quasi-complemen- 
tary utility; but only in relation to a particular people's 
psychology. 

With the advance of democracy and the general increase 
of comfort, kings, noblemen, and gentlemen are less likely 
to be faithfully accepted by the people as surrogates in 
consumption. Public expenditure must become more utili- 
tarian and directly social, instead of merely magnificent 
and representative. But the merely individualistic inter- 
pretation of the state's functions remains economically 
inadequate, being neither just to the past nor a competent 
guide for the future. Neither in ethics nor in economics is 
mere self -development a sufficient formula for human 
destiny. The utility of civilization itself is multiple. 
There are great opportunities for the extension of state 



172 WELFAKE AS AN ECONOMIC QUANTITY 

action in the service of multiple utility. These possibilities 
are being more and more cultivated. But if there is a ten- 
dency to socialize certain forms of enjoyment, it is just as 
true, on the other hand, that the organization of new forms 
of enjoyment and the further refinement of consumption 
is to be chiefly the work of individualistic impulses. Hence 
we need expect no radical disturbance of the balance be- 
tween social and private utilities, but only, in so far as 
means permit, a richer development of both. 



CHAPTER XVII 

THE VARIATION OF UTILITY IN RELATION TO 
consumer's rent, INDIVIDUAL AND SOCIAL 

The doctrine of consumer's rent or consumer's surplus is a 
corollary of the principle of diminishing utility, that is, of 
the prevailing conception of the variation of utility. The 
efficiency of the factors of production is measured by the 
quantity and variety of products, but the efficiency of the 
social economy cannot be determined short of the effective- 
ness of the utility realized. Consumer's rent is the kernel of 
this last matter. The foregoing development of the varia- 
tion theory should enable us to approach this subject 
equipped for more positive results than are obtainable from 
an inadequate conception of mere diminishing utility. 

Whether the term "rent" or "surplus" is the better des- 
ignation of this sort of realized utility is open to question. 
Certainly the former term is rather much overworked 
and without a well-settled meaning. But the thing desig- 
nated is not a fund but a continually replenished flow. 
"Rent" is, at any rate, income. It may be described as a 
succession or temporal series of surpluses. Hence the term 
*' consumer's rent," which recognizes the character of the 
utility in question as income, is preferred to the other. 

The doctrine of consumer's rent has suffered from mis- 
direction at the hands of its name-father, Alfred Marshall.^ 

1 Principles of Economics, book in, chap, iv, 1st ed., 1890, p. 175, 
where the term "consumer's rent" is used. In a footnote Marshall says: 
"The account of Consumer's Rent is here reproduced with slight altera- 
tions from some papers printed for private circulation in 1879." In the 
5th edition, 1907, the term "consumer's surplus" appears. In 1890, the 
concept is defined practically in terms of price. The author's confidence 
in the suitability of money for the measurement of consumer's rent con- 
tinues unabated. An acute critic of this conception (Hobson, Economics 



174 WELFARE AS AN ECONOMIC QUANTITY 

The point of view of this essay is quite incompatible with 
his notion that it can be measured in terms of money. This 
is one more mistaken idea consequent upon the economist's 
too exclusive attention to the external and the commercial. 
The effect of the difference in the value of money as be- 
tween different individuals may be avoided by keeping to 
the point of view of a single individual, though this makes 
the money measure of consumer's rent of little interest. 
What a man will or may conceivably pay for an article, 
however, is even so not a safe measure of its contribution to 
his satisfaction, because the amount may measure instead 
the exigency of his situation or the strategic position of the 
article in relation to the relative supply and demand of it 
and other articles. In other words, transputed utility is not 
a part of consumer's rent. That portion of the value of an 
article which is transputed is not based upon its own utility; 
the basis is the contribution to satisfaction of a complete 
good, in which the conspicuousness of the member having 
transputed utility may be due to an accident of commerce. 
If transputed utility could be considered a part of consum- 
er's rent, that utility might in the entire consumer's rent of 
an individual be counted any number of times. Even if we 
take account of the high value of money to those who possess 
so little of it, the total utility of the "submerged tenth" 
must be reckoned as less than proportionate to what is paid 
for food, because their circumstances impart to necessa- 
ries a high degree of transputed utility. That portion of 
total utiUty which we call consumer's rent, though nomi- 
nally positive, may then be actually negative. Neces- 
saries are valued no more than in proportion to their con- 
tribution to satisfaction only when such goods as those to 
the enjoyment of which they are preliminaries are also 
available. For the developed consciousness, under favor- 

qf Distribution, 1900, chap, ii) still retains valuation in money, but limits 
the possible amount of an individual's consumer's rent to his income or 
even to his savings. 



CONSUMER'S RENT 175 

able circumstances, bare necessaries make no appreciable 
direct contribution to satisfaction. 

Consumer's rent is a quantity that cannot be measured 
in money. The amount normally due to the utility of one 
article may be subject to subtraction for the sake of trans- 
putation to another. The higher ranges of the hypothetical 
curve of demand give no secure foundation for the calcu- 
lation of amounts of consumer's rent. 

If consumer's rent is often much smaller than a wrong 
method of measurement would make it appear to be, it is 
also sometimes greater than what is indicated by purchase 
prices obtained or reasonably to be expected for the goods 
which contribute to it. In previous chapters we have shown 
how, through substitution and rearrangement, the elasti- 
city of consumption groupings usually makes complemen- 
tary utility a net contribution to welfare, against which 
there is no compensating offset in the form of money-cost. 
Purchase price, even for the marginal unit, is proportioned 
to particular utility rather than to particular plus comple- 
mentary utility. 

Unimputable utihty is another important element of con- 
sumer's rent that cannot be measured commercially. It is 
only misleading to attempt to state its quantity in terms of 
money. 

Consumer's rent is the total utility less the summated 
marginal utility of a supply of goods. Or, in the case of a 
collection of heterogeneous goods, it is the total utihty 
less the sum of the marginal utilities, which are themselves 
summated in so far as there are supplies as well as single 
goods in the collection. An individual's consumer's rent is 
the consumer's rent for him of all the goods he possesses or 
uses added together. The consumer's rent of a group of 
individuals may be conceived as the sum of the consumer's 
rents of its members. Total utility and consumer's rent are 
concepts equally applicable for one or for many supplies, 
and for one individual or for society as a whole. 



176 WELFARE AS AN ECONOMIC QUANTITY 

The individual's total utility, and therefore his con- 
sumer's rent, is limited by his capacity to enjoy. In propor- 
tion to the primitiveness of the man's mind, such capacity 
may be small. Large capacity may be favored by natural 
refinement of disposition and developed by educational and 
other opportunities. But the man of refined tastes and 
sensibilities has an increased susceptibility to negative 
utility which is not entirely within his control. Thus his 
effective capacity for enjoyment is not so greatly increased 
as might appear. It may even be true that the zero level in 
the satisfaction of wants is a mean, and that positive and 
negative utility are relative to this mean. But this is ex- 
treme. The truth is doubtless between this and the ordin- 
ary assumption of an absolute and unchanging zero. Hence 
more goods do or may mean more satisfaction, even after 
the consumer becomes habituated to greater material 
abundance and refinement. Privation is not altogether 
relative. Total capacity is not a fixed or inelastic amount, 
the same for every one. The limitation upon it is not a 
case of tantalism. 

Perhaps the practical deduction from the situation is 
that, after fundamental needs are well provided for, better 
ordering of what one has is wiser than the acquisition of 
more goods. The amount of consumer's rent is elastic and 
may be increased indefinitely. But the acquisition of a 
larger number of goods, however varied, is not the surest 
way to increase it. The study of complementary relations 
and the keeping of marginal subjective costs relatively low, 
often by simplifying one's demand, promise better. 

Society's total utility, and therefore its consumer's rent, 
is likewise limited by capacity. It should be noted that, as 
used in the term " social consumer's rent," the conception 
of society is aggregate, not corporate. Society as such is 
not a consumer. 

Consumer's rent increases with the expansion of the 
individual's income and possessions. The increase of means 



CONSUIVIER'S RENT 177 

makes possible the acquisition of more and better goods, 
and the goods themselves are acquired at less subjective 
cost, having therefore a lower marginal utility. Let us con- 
sider, chiefly by way of review and synthesis of what has 
already been said, what significance for satisfaction the 
expansion of income has, taking up first the expansion of 
the income of the individual, and secondly that of society. 
The first few increments of income, which make it pos- 
sible to keep body and soul together, yield no consumer's 
rent. Necessaries in the strictest sense, which are neces- 
sary both in amount and kind, give no net satisfaction, at 
any rate not unless mere animal appetite dominates exis- 
tence to the exclusion of human quahties. If the amount 
of such goods obtainable is more than is absolutely nec- 
essary, however, the surplus may be made the means of 
leisure. Free time spent in idleness may be a sufficient 
source of satisfaction to an undeveloped being. He cannot 
have even so much unless he is somewhat released from the 
pressure of absolute economic necessity. The surplus and 
the leisure must be habitual and famiHar before advance 
steps in the direction of the refinement of consumption are 
undertaken. Then the surplus of coarse necessaries is re- 
duced in order to obtain variety and quality and interrela- 
tion in the articles consumed. Consumption thus comes to 
have human interest. The same ingenuity that diversifies 
and refines consumption will also increase man's produc- 
tive powers; it is bootless to attempt to say which sort of 
progress comes first. Thus man reaches a stage where he 
obtains net satisfaction and consumer's rent. Further de- 
velopment in the variety of goods, or in their utilization, 
will yield further satisfaction. The contribution to satis- 
faction, that is, the utility of goods, has thus been increased 
by the addition of a net utility which did not exist before. 
It may be questioned whether the initial bare necessaries 
have any utility, humanly speaking. It is true in more 
senses than one that the physical basis of life is not life 



178 WELFAKE AS AN ECONOMIC QUANTITY 

itself. Thus, for a while, total utility has been increasing 
faster than income or possessions. During the process of 
the refinement of consumption into a human stage, the 
total utility expands at least in proportion to income or 
possessions, and the net utility or consumer's rent expands 
at a greater rate than income. This is the stage where com- 
plementary utility is so important, since the refinement of 
consumption, narrowly defined, is merely preliminary to 
the cultivation of such utilities, and if broadly conceived, 
the former includes the latter. 

The above description smacks of primitive conditions 
and animal appetites in such a way as may suggest that it 
gives the writer's conception of how consumption may have 
evolved. Perhaps it does, but it is intended more particu- 
larly to apply to the different strata of present-day society. 
If there is no class in the United States whose consumption 
is confined strictly to necessaries as defined above, there 
are some few human beings near enough to such a state to 
make clear its meaning, both as regards the httle that life 
can yield to those so circumstanced and as regards the 
primitive or animal nature of their existence. 

Perhaps a given individual is incapacitated for passing 
directly from such a status to a better economic condition. 
But we find other individuals in the somewhat higher social 
stratum where the refinement of consumption is begun and 
where the elements of human conditions of life are at hand. 
Still higher up, the cultivation of complementary utilities 
may be sufficiently favored to be the main resource of con- 
sumption. Limitations of supply are still felt, but the folUes 
of certain economico-social ambitions being thus fore- 
stalled, the situation may be the better for the necessary 
restraint. 

Parallel with the refinement of consumption and with 
the development of complementary utilities goes greater 
emphasis upon durability in goods, and thus upon existen- 
tial utilities as sources of enjoyment. This also is a phase of 



CONSUMER'S RENT 179 

the evolution of consumer's rent. Below is barrenness of life, 
and beyond, a barrenness of goods perhaps equally futile. 
The danger of clogging by sheer multiplicity of posses- 
sions, which processive enjoyments escape, is lessened by 
limitation of pecuniary means. A due proportion between 
existential and processive expenditure will still obtain, but 
the proportion will naturally be more in favor of the former 
as the situation of the consumer improves. No distinction 
need here be made between this development and the 
cultivation of multiple utilities, though the latter is of 
course conditioned by degree of collective intelligence. 

It is at about this stage that a given absolute amount of 
income normally yields its maximum absolute amount of 
utility. It is probable, too, that there is no stage where the 
net amount of utility, or the consumer's rent, is greater. 
An abundance of goods which permits casting aside moder- 
ation is perhaps too rich a soil for the hardier growths that 
are alone capable of making thoroughly positive and inde- 
pendent contributions to happiness. 

To pursue further the effect of the expansion of the indi- 
vidual's income upon his total utility and consumer's rent 
is scarcely called for. The rest is mainly the field of the 
delusions of adventitious utility. Too many men, or their 
representatives in consumption, are so constituted that 
they fit well into the vanities of such a scheme of things 
and lead a useless life without the consciousness of being 
the pitiable puppets of circumstance. The evils of adven- 
titious practices and institutions, however, are of less im- 
portance as regards those who can become wholly absorbed 
and lost in them than as regards the distraction and the 
loss of time that they impose on really capable persons who 
must perforce conform somewhat to the demands of their 
social station and of "society." That their income is suffi- 
ciently large to press them to do so is their misfortune, a 
misfortune which in terms of economics means not merely 
that the enlarged income has brought little or no additional 



180 WELFARE AS AN ECONOMIC QUANTITY 

utility, but that it has reduced the amount of satisfaction 
below that which is obtainable by a modest and self-con- 
tained economy. To have little enough of temporal goods 
to excuse one to one's self and others for exercising a ple- 
beian restraint in consumption is very helpful. 

The income of society, also, that is, the net amount 'per 
capita annually available for consumption, may be viewed 
as expanding through the various stages from privation to 
superabundance. Since the distribution will not be even, 
the privation or superabundance must be supposed to be 
an average or per capita condition. 

The measure of utihty is still contribution to satisfaction. 
Increase of values is not significant. Whether an increase 
of values will actually accompany abundance or super- 
abundance of goods is a question whose answer depends 
altogether upon what is meant by value, and in particular 
upon whether commercial value is in some sense absolute or 
merely a measure of relative power in exchange. In the 
case of national wealth, however, complete subsumption 
under exchange value is not usual among economists. It 
would be generally admitted that national wealth is not 
adequately measured by the sum of values. The ground is 
thus prepared for the standpoint of utility. 

There are wastes and economies possible in the consump- 
tion of a social group which do not appear in the individual's 
consumption considered abstractly by itself. The great 
social waste is adventitious consumption, which has al- 
ready been sufficiently discussed. There is need of a moral 
awakening in this particular. 

The greatest social economy possible to effect in con- 
sumption lies in the direction of developing multiple utili- 
ties. This also has been discussed. Those things which are 
adapted to furnishing multiple utility afford unlimited 
scope for the future evolution of consumption. The pos- 
sibilities would be greater still if human nature should 
ever become such that men could be entirely trusted to 



CONSUMER'S RENT 181 

exercise care in the use of things not their own private 
property. 

In so far as the average is also the typical and usual situ- 
ation as regards the distribution of wealth, that is, in so far 
as we can suppose equality to hold for the various stages 
of our hypothetical comparison, the effect of the expan- 
sion of national wealth will be simply the sum of the effects 
on individuals, with one or two important quahfications. 
Adventitious utility flourishes best in an atmosphere of 
inequalities, hence there would be little encouragement 
to its growth under the conditions supposed. Economic 
equality would, on the other hand, favor as much as 
possible cooperative enterprises in consumption and the 
cultivation of multiple utility. In fact, it is to be doubted 
whether any better use could be found for greatly increased 
individual means than to turn the surplus over to volun- 
tary associations or to the community for expenditure upon 
objects of multiple utility. The unimputable utilities of a 
fortunate natural environment can also be the more surely 
preserved and treasured, and the better cared for, by a 
society having abundance of material resources obtainable 
without exhaustive use of nature's gifts, and without the 
incentive to selfish ambition fomented by inequality. 

If along with abundance or superabundance of wealth, 
however, there comes a high degree of economic inequality, 
the situation will be quite different. The increase of means 
will bring greatly increased expenditure for multiple utili- 
ties, either from the philanthropic gifts of the rich or from 
the proceeds of taxation. But some of the public expenditure 
even is likely to be tainted with elements of adventitious 
utility. Moreover, the state of mind of the people will prob- 
ably be so influenced by the adventitious practices of the 
rich in personal expenditure that they will not appreciate 
institutions of multiple utihty as they should. They will not 
care for them as for their own, and the expenses of adminis- 
tration of such utilities will therefore be unduly high. The 



182 WELFARE AS AN ECONOMIC QUANTITY) 

ambition to be rich and to indulge in wasteful and adventi- 
tious expenditure, and the reflected bitterness and envy of 
those not able to compete, will taint life more and more in 
proportion to abundance if a high degree of inequality goes 
with it. The leaders of society will be only the more effec- 
tive as leaders to destruction. In the early stages of econo- 
mic evolution, such was not the case. When it was possible 
for only a few to have leisure, inequality was necessary to 
progress. Where all can have leisure, a marked degree of 
inequality of economic means is not necessary for leader- 
ship, and it is Hkely to_ signify instead a bad example set 
by the idle rich. 

It was the great fault of the classical school of economic 
thought — a defect frequently shared by their severest 
critics — that it assumed that maximum production, or 
maximum income and possessions, was the end and crite- 
rion of the economic activities of society. As a rough first 
step in analysis this is not bad. But, looking beyond eco- 
nomic or exchange value to the utility from which it has 
its being, we find it is not to be taken for granted that maxi- 
mum utility results from maximum wealth. All depends 
upon the distribution of wealth. Assuming a high degree of 
abundance as a possibility for all or most of the members of 
society, then the most desirable state of distribution is one 
of approximate equality. Wealth that is put to a use that 
has only necessarily and instinctively transputed utility 
serves no human purpose. It is wasted. Still clearer and 
greater, in an advanced stage of economic evolution, is the 
waste of the wealth that serves only adventitious ends. 
Real utility lies between these extremes. In order to ob- 
tain the greatest amount of true utility from a given 
amount of wealth, it should be so distributed as to consti- 
tute only moderate incomes. 

Not only total true utility, but the consumer's rent 
composed of such utility — and it is properly composed of 
nothing else — will thus be greatest in a society where 



CONSUMER'S RENT 183 

wealth is evenly distributed. The lowest social classes are 
at a disadvantage in their attempts to obtain consumer's 
rent, not only on account of the transputation of utility 
due to their necessities, but also on account of high costs 
and high marginal utility. The very rich, on the other 
hand, often obtain no true utility from their great riches, 
therefore a fortiori no net utility. 

One very important effect of the increase of income and 
possessions is sometimes forgotten, that is, its bearing on 
the utility of leisure or of free time. As goods become more 
and more abundant, further goods are less desirable than 
further free time, the marginal utility of goods as compared 
with the marginal utility of leisure, so to speak, declining 
till preference is given to free .time. As goods accumulate, 
it is to be expected that both more thought and more time 
should be given to making use of them. In so far as it is 
true that labor and life, or enjoyment, will not mingle, an 
increase in the productiveness of labor that does not bring 
greater leisure is wrong somewhere. 

Control and management of goods, or material means of 
welfare, constitute the essence of economy. The science 
of economics, therefore, in so far as it inculcates anything, 
— as it is bound to do, not directly, but by impUcation, — 
teaches the limitation of individual accumulation. It 
points towards simplicity of life, not in the perverted 
sense of doing without worldly goods, but in the sense of 
exercising moderation or restraint in their accumulation. 
If the older economics appeared to support the contrary 
principle, this was because it occupied itself too much with 
production. Goods should be valued by their possessor 
only as there is time and energy to make use of them. This 
is just as true as is the converse proposition that material 
means are required in order to make anything of time and 
life. That most may be made of life by those who are not 
bothered, and do not bother themselves, with either ex- 
treme of poverty or riches is a truth seldom seen whole. 



CHAPTER XVIII 

OF CERTAIN PRACTICAL APPLICATIONS 

The writer is only secondarily concerned with the practical 
application of the theories above discussed. But he could 
not conceal, if he would, the significance of this examina- 
tion of the variation of utility for passing judgment upon 
the wastefulness, at both extremes of the social scale, of 
the present economic order. Especially direct and clear 
is its bearing upon the expenditures of the rich, and upon 
the justifiability of such a division of the social income as 
turns so much of it to adventitious use. 

To say that enjoyment (or utility) does not increase in 
proportion as riches or property increase is to reiterate a 
commonplace of economic discussion. It is to be presumed 
that this proposition has received some accession of con- 
tent and meaning from the foregoing chapters. The diminu- 
tion of utility at a diminishing rate, though fundamental, 
falls much short of the whole truth, yet even with only so 
much established, the passing of judgment upon an eco- 
nomic institution merely with reference to the magnitude 
of its physical contribution to production is presumptuous. 
Free trade has often been praised too much and socialism 
too much condemned on such a basis. It is no sufficient 
excuse that insight into the tendencies and effects of pro- 
duction in relation to possibihties of rational enjoyment 
is not easy to obtain. 

"The chief enjoyment of riches consists in the parade 
of riches." ^ Adam Smith thus tersely puts the point that 

^ "With the greater part of rich people, the chief enjoyment of riches 
consists in the parade of riches, which in their eye is never so complete as 
when they appear to possess those decisive marks of opulence which no- 



OF CERTAIN PRACTICAL APPLICATIONS 185 

we have developed in detail as a doctrine of adventitious 
utility. So far as these words are true, riches serve no 
worthy purpose. They do hold true for the majority of the 
very rich, some of whom have such ends more or less con- 
sciously before them, while many merely conform to con- 
ventional standards and demands of fashion which are 
themselves determined by adventitious motives and ten- 
dencies. Only for a minority are the acquisition and use of 
riches incidents of activities more rational and more moral. 
The typical forms of expenditure of the very rich are thus 
at best wasteful and at worst anti-social. They arouse 
jealousy and envy, and evidence an unfeeling lack of 
imagination for the effect upon others of such conduct. 
Even where the idle rich kill time with the aid of the fine 
arts, they demoralize taste with ostentation. Their bid- 
ding-up of the price of curios and rarities of all sorts meas- 
ures their lack of moderation. But their capricious monop- 
olization of certain rare articles shows more discrimination 
than most of their activities do. Nevertheless, it too often 
takes these articles away from their natural setting and 
deprives them of a portion of their real complementary 
utility. The expenditures of the rich commonly disturb 
the equilibrium of prices for goods and services and give 
the merchant too much training in exploiting his customers 
through charging what the traffic will bear. 

While we may thus properly condemn the ordinary 
forms of expenditure of the rich, and thus to a degree riches 
themselves, — for their justification must depend upon 
their having a social function, — it is not therefore nec- 
essarily true that execution should follow judgment. No 
public agency can be trusted to prescribe the direction 
expenditure shall take. Even so, sumptuary laws would be 
but palliatives. Legislation would do better to attack the 
root of the evil, that is, the inequality in the distribution 

body can possess but themselves." Wealth of Nations, book i, chap, xi, 
part II, p. 173. 



186 WELFARE AS AN ECONOMIC QUANTITY 

of wealth. It is likely that the state will soon do this, 
largely through its fiscal policies and through reformation 
of the laws of inheritance. This would amount merely to 
carrying out policies in which the first steps have already 
been taken. 

The rich, and especially the rich in America, have not 
been so lacking in intelligence as altogether to fail to see 
the vanity and futility of adventitious expenditure or of 
the attempt entirely to dispose of their surplus for merely 
personal ends. Convention and fashion blind men all too 
easily to the presence of adventitious utility. But the 
absence of an aristocratic tradition of high life and idle- 
ness here has made the situation somewhat better than it 
is in other countries. Rich men who want something for 
their money, and who are also not averse to making their 
aims social rather than merely personal, have often de- 
voted their resources to philanthropic and educational 
purposes on a scale unknown before. They should receive 
due credit for their intelligence and public-spiritedness, 
whether their motive be pure altruism or in part enlight- 
ened egoism. 

It is conceivable that their public-spiritedness might 
carry some of them so far as to leave for their children un- 
earned property and income only in such amount as to 
put them without labor on a level with the members of 
the professional classes, who live comfortably but who do 
so only because of their daily labor for society. If so, such 
a consummation would certainly be no calamity, either 
for their descendants or for the rest of society. Here is the 
proper criterion, perhaps, for the just limit on the amount 
of property and income inheritable by a single individual. 
The permanent incomes received by inheritance or gift 
should not exceed the limit of the greatest earned incomes 
as determined by the highest salaries paid for industrial 
or other services. An inherited income of $100,000 a year 
is plenty. Society would be benefited all around if, by a 



OF CERTAIN PRACTICAL APPLICATIONS 187 

well-devised fiscal policy, and by the regulation of inheri- 
tance, the state should gradually make effective some such 
limitation, thus preventing an inverse selection of individ- 
uals and families to receive the greatest amount of riches, 
that is, a selection favoring those least inclined by he- 
redity or by familiar example to philanthropy and public 
spirit. American millionaires are distinguished for gener- 
ous philanthropy perhaps largely because they are, to so 
great an extent, of the "new rich." It has been observed 
that the oldest of our multi-millionaire families are not 
notably philanthropic. 

This is by no means the same as saying that the institu- 
tion of inheritance is of no benefit to society and ought to 
be abolished. Its value to society is of the same order as 
is the value of the educational advantages freely given by 
parents to their children. It has therefore played a leading 
part in the evolution of civilization. There is no reason to 
suppose its usefulness is at an end. But that usefulness is 
nowise proportioned to the amount of property given or 
transmitted to the individual beneficiary. Quite the con- 
trary is true. A limited amount of inherited property is 
of greater benefit to the individual by reason of the limita- 
tion. The extent of the benefit conferred, moreover, is 
thereby multiplied, for the number of direct beneficiaries 
becomes proportionate to the total amount of riches. 
Whatever of reflected value, also, the institution may have 
for society is thus more generally diffused. If the time 
ever comes when nobody can be a multi-millionaire by 
inheritance, the institution will be of greater social value 
than now. 

Both ethics and economics must go beyond positive law 
and examine its grounds. Legal rights are subject to 
evolution. Of their very nature, moreover, as based upon 
precedent, they may be presumed to be in chronic need 
of reform. The evolution of abstract property, of which 
securities are the familiar type, has somewhat changed the 



188 WELFARE AS AN ECONOMIC QUANTITY 

situation from what it was in the days of Locke and of 
England's 17th century revolutions in defense of "life, 
liberty, and property." That is a significant alteration 
which the Declaration of Independence made in this 
phrase, substituting for property "the pursuit of hap- 
piness." Are existing laws in relation to property and its 
inheritance merely such as protect the rights of the indi- 
vidual in his pursuit of happiness? If not, what modes of 
division of the social income will most facihtate such an 
end? If the right of private property is essential to the 
right to the pursuit of happiness in so far as happiness 
depends upon the control of material means, — which is 
but another way of putting Locke's idea that a man should 
have property in that with which he has mixed his labor, 
— and if that right is defensible only in so far as it is thus 
essential, then the desirability of certain changes in prop- 
erty rights must be deduced from the foregoing discus- 
sion. A change in law and public policy with regard to the 
inheritance of large fortunes is what seems to be particu- 
larly needed. That the evolution of forms of property 
right has very much altered the situation from what it was 
a few hundred years ago is significant in this connection, 
but not pertinent to our study of consumption. 

These pages contain some remarks about the rich which 
may be regarded as uncomplimentary. They have where- 
with to console themselves, and wherewith to conciliate 
more respect of a certain sort than is their due. But in 
order that we may not appear to exhibit partiality and to 
discriminate unfairly in our remarks touching invidious 
motives and adventitious ends, we should add that the 
ambition to be and "to do" rich, as that would ordinarily 
have to be interpreted in the concrete, puts the one so 
absorbed into the same class morally with those who are 
successful in this ambition. The category is no doubt very 
inclusive. Human nature in general is absurdly invidious 
in its judgments and aspirations. The social fabric and 



OF CERTAIN PRACTICAL APPLICATIONS 189 

the daily practices of men are permeated through and 
through with wasteful vanities and trivial ambitions. 
The economic evils resulting are most noticeable, not 
where inclination is strongest, but where opportunity is 
greatest. Those who are successful in achieving riches are 
on the whole only the more efficient ones in a large class, 
the other members of which are not morally better but 
only less able than they. Lest this be undue praise, how- 
ever, let us hasten to add that practical efficiency is often 
made such by narrowness, whether natural-born or due 
to force of circumstances. This disease of adventitious 
enjoyment ought to be in large part curable by enlight- 
enment, but some traces of the evil must remain till 
human nature itself is made over. 

There is another phase of waste of utility besides that 
due to the traditional follies of the rich, perhaps equally 
important in magnitude. At the lower end of the economic 
scale are those whose consumption maintains their exist- 
ence, but who are not able to live humanly. As a minus 
quantity is less than zero, so bare subsistence is, from an 
economic point of view, worse than the cessation of 
existence. 

If it is less easy to make some practical application of 
this fact than it is of the knowledge of evil conditions at 
the other end of the social scale, that should not make us 
less ready to look the fact in the face. We must recognize 
that the waste of life through the continuance and mul- 
tiplication of existences at the lower extremity of society 
is not merely, indeed not mainly, an economic question. 
Humanitarian considerations may properly count for more 
than economic reasons here, while, in the case of the ex- 
penditure of the rich, economic reasons afford the suffi- 
cient basis for judgment. Our own humanity — something 
quite different from pity for the sufferings of the poorest 
or (objectively) most miserable — is reasonably what pre- 
vents society from putting them out of the way by the use 



190 WELFARE AS AN ECONOMIC QUANTITY 

of chloroform or some equivalent means. So nature is left 
to perform the operation without the use of an ansesthetic. 
In this economic essay we may be excused from even sug- 
gesting a solution for so large a sociological problem. 
Hence the greater space devoted to the essentially eco- 
nomic problem at the other extreme of society. 

The use of goods to maintain life where there are no fur- 
ther goods to make life worth maintaining is an economic 
absurdity. The reckoning of the value of such beings to 
society is one of the curious misapplications of the concept 
of economic value. A man may have much value to his 
fellows, but it is, or ought to be, chiefly other than eco- 
nomic. The value of men to one another, also, is reciprocal 
and complementary, hence not to be arrived at by inven- 
tory. So far as the value of one man to another is economic, 
the net amount must often be negative. The loss of the 
"value" of a man should be compared with the effect on a 
balance-sheet of wiping out asset and corresponding liabil- 
ity at the same time. Certainly society is indebted to 
every man for something, but every man is in turn the 
beneficiary of society. The balance or net, even on the 
average, is not at all times and places in favor of society. 
If the "submerged tenth" receives little from society, its 
members usually give even less. Their existence is, also, 
humanly speaking, worth nothing to themselves. If it may 
be made so to others, by what right? A system of slave 
labor might use them, but a free and inclusive democratic 
society cannot. 

Thus democracy is a society of peers. A democrat is not 
a leveler. He would, it is true, destroy causes of artificial 
elevation. But as regards personal qualities, his standard 
for membership in this society of peers may be as high and 
as exclusive as his ideals will make it. The standard may 
easier be high than low. He is no democrat who claims for 
the naturally inferior equal rights. The democrat would 
have all equals, and all worthy to be so. He would there- 



OF CERTAIN PRACTICAX APPLICATIONS 191 

fore abolish the inferior. He would have no hierarchies. He 
has no use for the lord, or the vassal, or the slave. Patron- 
alism and paternal or Tory socialism do find places for the 
inferior and for natural slaves. True democracy cannot. 
The democrat will not use a fellow- man for merely per- 
sonal ends. 

Our conclusions — that the means of bare existence are 
of no utility or of contingent utility only, that moderate 
incomes are good in themselves and good for society, and 
that great incomes, especially great inherited incomes, 
mean principally a waste of utilities — are an incidental 
outcome of this analysis of the modes of variation of util- 
ity. That we are thus brought to the "golden" mean as an 
ideal of economics is interesting. This rule of moderation 
should work both ways. Adequacy of means and simplicity 
in the conduct of life meet at this point. But modern 
preaching, neglectful enough of both sides, is especially 
afraid of one half of this conclusion. That it is as difficult 
for the rich man, in propria persona, to enter heaven as for 
the camel to pass through the needle's eye is true, but so 
also is the view of Aristotle, that virtue and happiness 
plainly require adequate means, including economic goods. 



THE END 



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